Court Opinion

ID: 4017262
Source: CourtListenerOpinion
Date Created: 2016-07-19 23:09:07.665479+00
Date Added: 2024-06-11T09:21:48.799401
License: Public Domain

[J-11A-2016 and J-11B-2016]
               IN THE SUPREME COURT OF PENNSYLVANIA
                            MIDDLE DISTRICT

      SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, JJ.

A. SCOTT ENTERPRISES, INC.,       :   No. 55 MAP 2015
                                  :
                Appellee          :   Appeal from the Order of the
                                  :   Commonwealth Court at Nos. 2163 &
                                  :   2289 CD 2013 dated October 21, 2014,
          v.                      :   reconsideration denied December 5,
                                  :   2014, affirming in part and reversing in
                                  :   part the Order of the Lehigh County
CITY OF ALLENTOWN,                :   Court of Common Pleas, Civil Division,
                                  :   at No. 2011-C-2818 dated November
                Appellant         :   22, 2013, and remanding.
                                  :
                                  :   ARGUED: November 18, 2015
                                  :   RESUBMITTED: January 20, 2016

A. SCOTT ENTERPRISES, INC.,       :   No. 56 MAP 2015
                                  :
                Appellee          :   Appeal from the Order of the
                                  :   Commonwealth Court at No. 379 CD
                                  :   2014 dated October 21, 2014,
          v.                      :   reconsideration denied December 5,
                                  :   2014, affirming in part and reversing in
                                  :   part the Order of the Lehigh County
CITY OF ALLENTOWN,                :   Court of Common Pleas, Civil Division,
                                  :   at No. 2011-C-2818 opinion filed
                Appellant         :   February 28, 2014, and remanding.
                                  :
                                  :   ARGUED: November 18, 2015
                                  :   RESUBMITTED: January 20, 2016
                                         OPINION

JUSTICE DOUGHERTY                                               DECIDED: July 19, 2016

       In this discretionary appeal, we consider whether an award of a statutory penalty

and attorney fees under the prompt payment provisions of the Commonwealth’s

Procurement Code, see 62 Pa.C.S. §3935, is mandatory upon a finding of bad faith,

irrespective of the statute’s permissive phrasing.      We hold such an award is not

mandatory, and therefore reverse the order of the Commonwealth Court and remand

the case to the trial court for proceedings consistent with this Opinion.

       Appellant City of Allentown (City) contracted with appellee A. Scott Enterprises,

Inc. (ASE), to construct a new public road.1        After arsenic-contaminated soil was

discovered at the worksite, the City suspended work on the project. Following testing, it

was determined construction could resume if precautions were taken. Accordingly, the

City instructed ASE to obtain revised permits and proceed with the project. However,

the existing contract did not include terms regarding the potential for contaminated soil,

despite the fact the City was aware there might be contamination prior to entering into

the contract, and ASE declined to proceed, explaining it would incur substantial

additional costs due to the contaminated soil. The parties made several attempts to

reach an agreement in which ASE would continue the construction, but to no avail.

Consequently, ASE sued the City to recover its losses on the project, alleged breach of

contract, and sought compensation under theories of quantum meruit and unjust

1
  The Commonwealth’s Procurement Code, and more specifically, its provisions relating
to prompt payment for public works contracts entered into by a government agency,
apply to the project. See, e.g., 62 Pa.C.S. §§3931-3939 (prompt payment schedules).

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enrichment, as well as interest and a statutory penalty and fee award for violations of

the prompt pay provisions of the Procurement Code.

      After a trial, a jury found the City breached its contract with ASE and also

withheld payments in bad faith. Trial Court Opinion at 28 & n.5.2 Both parties filed post-

trial motions. The City requested the trial court to enter judgment in its favor or grant a

new trial with respect to ASE’s breach of contract claims, as well as enter judgment in

its favor or grant a new trial with respect to ASE’s Procurement Code claim. The City

argued there was insufficient evidence of bad faith to pose that issue to the jury, while

ASE’s motion sought a statutory penalty and attorney fees for bad faith pursuant to

Section 3935 of the Procurement Code. Section 3935 provides, in relevant part:

      (a) Penalty.--If arbitration or a claim with the Board of Claims or a court of
      competent jurisdiction is commenced to recover payment due under this
      subchapter and it is determined that the government agency . . . has failed
      to comply with the payment terms of this subchapter, . . . the arbitrator, the
      Board of Claims or the court may award, in addition to all other damages
      due, a penalty equal to 1% per month of the amount that was withheld in
      bad faith. An amount shall be deemed to have been withheld in bad faith
      to the extent that the withholding was arbitrary or vexatious. . . [.]
      (b) Attorney fees.--Notwithstanding any agreement to the contrary, the
      prevailing party in any proceeding to recover any payment under this
      subchapter may be awarded a reasonable attorney fee in an amount to be
      determined by the Board of Claims, court, or arbitrator, together with
      expenses, if it is determined that the government agency . . . acted in bad

2
  The jury verdict slip included Question 4: “Do you find by a preponderance of the
evidence that the City of Allentown withheld payments due A. Scott Enterprises in bad
faith?” N.T. 1/22/13-1/31/13 at 1413. The court instructed the jury on bad faith as
follows: “An amount shall be deemed to have been withheld, in bad faith, to the extent
that the withholding was arbitrary or vexatious. An amount shall not be deemed to have
been withheld in bad faith, to the extent that it was withheld pursuant to withholding of
payment for deficiency items according to the contract.” Id. at 1418. The court did not
further define “arbitrary or vexatious.”

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      faith. An amount shall be deemed to have been withheld in bad faith to
      the extent that the withholding was arbitrary or vexatious.
62 Pa.C.S. §3935 (emphases added).3 The court did not rule on the post-trial motions

within 120 days and, on praecipe filed by ASE on November 22, 2013, judgment was

entered on the jury’s verdict of $927,299.00. See Pa.R.C.P. 227.4(1)(b) (prothonotary

shall, upon praecipe of party, enter judgment upon jury verdict if post-trial motions are

filed and court does not dispose of all motions within 120 days of first motion; judgment

entered is final).4 Both parties appealed to the Commonwealth Court.

      In its Pa.R.A.P. 1925(a) opinion, as relevant to this appeal, the trial court stated

although there was sufficient evidence of bad faith to submit that question to the jury,

the court nevertheless retained discretion to deny an award. The court explained its

decision on both points as follows:

      [T]he City admitted that it would not release or terminate the Contract with
      ASE until ASE came up with the right price. The City refused force
      accounts.[5] The City did not direct ASE to demobilize or to resume work
      unconditionally on forced account. There was never a writing authorizing
      the additional work and compensation as required by the City’s Contract.
      Furthermore, the City knew or should have known that the recommended
      soil testing was not performed. The City’s Engineer, . . .and Lehigh
      County Conservationist recommended the soil testing due to the likelihood

3
  Although the statute provides for “expenses” as well as a penalty and attorney fees,
the parties argue largely only in terms of penalty and attorney fees. The imprecision is
of no moment to our decision, and we will follow the parties’ preferred expression.
4
 The City’s post-trial motion was filed on February 6, 2013, and ASE’s was filed two
days later. The court heard argument on July 12, 2013. The parties do not raise any
challenge deriving from the manner of entry of judgment on the verdict.
5
  “Force account work is work that goes beyond that set forth in the contract and is
generally paid on a time and material basis.” A. Scott Enterprises, Inc. v. City of
Allentown, 102 A.3d 1060, 1063 n.1 (Pa. Cmwlth. 2014), citing Green Construction Co.
v. Dep’t of Transp., 643 A.2d 1129, 1131 n.1 (Pa. Cmwlth. 1994).

                            [J-11A-2016 and J-11B-2016] - 4
      of contaminated soil. Moreover, PennDOT agreed to do the test.
      Nevertheless, no one tested or verified testing prior to contracting with
      ASE. Furthermore, the City failed to include terms or conditions providing
      for contaminants in their contract. Additionally, the City never disclosed to
      ASE that soil testing was recommended, but never completed. [The
      suspension of work on the Contract] could have been avoided if the City
      had followed through with PennDOT, and accepted the recommendations
      of [the Engineer and Conservationist]. There was sufficient evidence to
      send the question of bad faith to the jury. At the same time, it is within the
      discretion of this [c]ourt to award penalty, attorneys’ fees and interest.
      Given the conflicting testimony as to damages presented by ASE, the
      request for such award is denied.
Trial Court Opinion, 2/28/14, at 32-33.6

      In the Commonwealth Court, each party raised multiple issues. As relevant here,

the City claimed the trial court erred in submitting the Procurement Code bad faith issue

to the jury because ASE failed to prove the claim. ASE disputed that assertion and, in

its cross-appeal, claimed the trial court erred in failing to award a statutory penalty and

attorney fees premised upon the jury finding of bad faith. Specifically, in ASE’s view,

such an award under Section 3935 is mandatory where a jury finds a government

agency acted in bad faith. ASE argued the trial court improperly set the jury’s finding of

bad faith aside and substituted its own judgment; while acknowledging the amount of a

Section 3935 award is discretionary, ASE asserted the trial court could not deny outright

a penalty and attorney fees where bad faith was established.

      The City responded by noting ASE’s complaint about the denial of a Section

3935 award arose in an unusual procedural posture because the taking of judgment

precluded the trial court from deciding the claim prior to appeal. The City then disputed
6
  The court filed two opinions, in response to duplicate appeals filed by ASE. The
second opinion, filed on May 29, 2014, incorporated the February 28, 2014 opinion in its
entirety. A. Scott Enterprises, 102 A.3d at 1064 n.3; ASE’s Brief at 8.

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ASE’s view of the statute, stressing the discretionary nature of the statutory language.

The City asserted ASE’s issue, properly framed, was whether the trial court abused its

discretion in failing to award a penalty and fees. In the City’s view, ASE’s contrary

reading ignored the right to a Section 3935 award is created and controlled by the

statute, and the statute does not vest a jury with the ultimate power to issue an award.

The City also argued the trial court did not abuse its discretion in denying an award

because the amount sought by ASE was, by ASE’s own admission, incorrect; the City

claimed it was within the court’s discretion to conclude the non-payment of those

amounts was neither arbitrary nor vexatious.

       In a published decision, the Commonwealth Court agreed with ASE’s reading of

the statute, notably opining:

       The purpose of the Procurement Code is to “level the playing field”
       between government agencies and contractors. It advances this goal by
       requiring a government agency that has acted in bad faith to pay the
       contractor’s legal costs, as well as an interest penalty. Otherwise, the
       finding of bad faith is a meaningless exercise with no consequence for the
       government agency found to have acted in bad faith.

A. Scott Enterprises, Inc. v. City of Allentown, 102 A.3d 1060, 1070 (Pa. Cmwlth. 2014)

(internal citation omitted). Relying in part on Missouri case law, the court concluded

Section 3935 “requires the imposition of attorney’s fees and the statutory penalty upon a

jury’s finding of bad faith,” reversed the trial court’s “refusal to consider” an award, and

remanded to the trial court for a hearing to determine, within its discretion, the amount

of the penalty and attorney fees to be awarded. Id., citing City of Independence v. Kerr

                            [J-11A-2016 and J-11B-2016] - 6
Construction Paving Co., 957 S.W.2d 315 (Mo. Ct. App. 1997).7 The City’s application

for reargument en banc was denied.

         Upon petition by the City, this Court granted allowance of appeal to address

whether “a jury finding of bad faith require[s] the trial court to impose a statutory penalty

and award attorney fees under” Section 3935, while denying review of other issues

raised in the City’s petition for allowance of appeal. A. Scott Enterprises, Inc. v. City of

Allentown, 117 A.3d 1277, 1277-78 (Pa. 2015) (per curiam).

         The City argues that, when construed according to its common and approved

usage, the word “may” as used in Section 3935 is properly interpreted as permissive,

not mandatory.       The City acknowledges there are instances when courts have

deliberately interpreted permissive language like “may” to mean “shall,” but it claims

such limited circumstances are not present here. The City also notes the text of the

Contractor and Subcontractor Payment Act (CASPA), 73 P.S. §§501-516, a prompt

payment statute applicable to non-governmental parties, provides for a penalty and

attorney fees similar to the Procurement Code, but explicitly states penalties and

attorney fees “shall” be awarded where payment is “wrongfully withheld,” the amount of

which is then determined by the court or arbitrator. 73 P.S. §512(a)-(b).8 The City

7
  The Commonwealth Court also confirmed ASE is entitled to some statutory interest on
the verdict amount, and directed the trial court on remand to mold the verdict to include
certain items of pre- and post-judgment interest. A. Scott Enterprises, 102 A.3d at
1072-73. The issue of judgment-related interest is not before us in this appeal.
8
    Section 512 provides:
       (a) Penalty for failure to comply with act.--If arbitration or litigation is
       commenced to recover payment due under this act and it is determined
       that an owner, contractor or subcontractor has failed to comply with the
       payment terms of this act, the arbitrator or court shall award, in addition to
(continuedN)

                             [J-11A-2016 and J-11B-2016] - 7
contends CASPA’s use of “shall,” as opposed to “may,” is significant as it demonstrates

the General Assembly was cognizant of the distinction between mandatory and

discretionary bad faith penalty awards; had the Legislature intended to make the

Procurement Code awards mandatory as well, it would not have used permissive

language. Moreover, the City argues the Commonwealth Court improperly rested its

decision on a Missouri case involving a distinguishable statute, and the perceived broad

legislative intent underlying the Procurement Code as a whole, rather than applying the

rules of statutory construction and acknowledging the narrow circumstances in which

Pennsylvania courts have interpreted “may” to mean “shall.”

      The City further notes Section 3935 makes no mention of a jury, and the

Legislature therefore could not have intended the trial court to be bound to award a

penalty and attorney fees whenever a jury makes a finding of bad faith; such an

interpretation would contravene the statute’s express provision that the arbitrator, the

Board of Claims, or the court makes the award. See 62 Pa.C.S. §3935(a)-(b). Finally,

the City claims, if the Commonwealth Court’s decision is not reversed, the result is an

(Ncontinued)
     all other damages due, a penalty equal to 1% per month of the amount
     that was wrongfully withheld. An amount shall not be deemed to have
     been wrongfully withheld to the extent it bears a reasonable relation to the
     value of any claim held in good faith by the owner, contractor or
     subcontractor against whom the contractor or subcontractor is seeking to
     recover payment.
      (b) Award of attorney fee and expenses.--Notwithstanding any agreement
      to the contrary, the substantially prevailing party in any proceeding to
      recover any payment under this act shall be awarded a reasonable
      attorney fee in an amount to be determined by the court or arbitrator,
      together with expenses.
73 P.S. §512 (emphases added).

                           [J-11A-2016 and J-11B-2016] - 8
award essentially directed by jurors who were not comprehensively instructed on the

meaning of “arbitrary or vexatious,” or told their finding of bad faith would result in a 1%

penalty and counsel fees paid from public funds. The jury was not instructed in this

regard, argues the City, because the trial court believed, properly so, it had discretion to

decide the ultimate question of whether a statutory award was warranted.

       In response, ASE first argues the City did not contend, either at trial or in its post-

trial motions, that the trial court retained discretion to decline to award a penalty and

attorney fees; rather, ASE maintains the City’s sole challenge was to the quantum of

proof submitted by ASE to establish bad faith. Consequently, ASE alleges, the City

failed to preserve the issue of whether the jury’s finding of bad faith mandates an award

under Section 3935, and its appeal should be dismissed.

       On the merits, ASE tracks the Commonwealth Court’s reasoning below,

asserting the legislative purpose underlying the Procurement Code — i.e., providing

contractors with a remedy against governmental entities that withhold payment in bad

faith — cannot be achieved without a mandatory award of a penalty and attorney fees

where bad faith is found. “‘Otherwise, the finding of bad faith is a meaningless exercise

with no consequence for the government agency found to have acted in bad faith.’”

ASE’s Brief at 19, quoting A. Scott Enterprises, 102 A.3d at 1070. ASE further notes

there is no language in Section 3935 suggesting once a contractor has proven bad faith

additional factors must be established before the arbitrary or vexatious conduct is

deemed sufficiently egregious to warrant a penalty and attorney fees award. Thus, ASE

contends it is unclear what burden a contractor would bear, if “may” is read as

permissive. In ASE’s view, such an interpretation would subject the availability of the

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statutory remedies to the “individual whim of each trial court judge.” Id. Again agreeing

with the Commonwealth Court, ASE posits the trial court judge, while having discretion

regarding the amount of awards, has no discretion to refuse them altogether.

      Moreover, ASE submits Pennsylvania courts, as well as courts of other states,

have interpreted “may” as mandatory when a statute directs the doing of a thing for the

sake of justice or when necessary to effectuate a statute’s underlying purposes. See,

e.g., Hotel Casey Co. v. Ross, 23 A.2d 737, 740-41 (Pa. 1942) (where Commonwealth

was not rightfully entitled to taxes paid, statute authorizing refund or credit to taxpayer

should be interpreted as mandatory).      ASE also posits Pennsylvania’s intermediate

appellate courts have held a finding of bad faith under Section 3935 mandates an award

of a penalty and attorney fees. See, e.g., A.G. Cullen Constr. Inc. v. State Sys. of

Higher Educ., 898 A.2d 1145, 1164-66 (Pa. Cmwlth. 2006); Pietrini Corp. v. Agate

Construction Co., 901 A.2d 1050, 1053 (Pa. Super. 2006).

      ASE acknowledges that, while both CASPA and the Procurement Code were

designed to authorize awards of penalties and attorney fees under specified conditions,

the key difference between the two statutes is the Procurement Code requires a

threshold finding of the government agency’s bad faith.         Accordingly, there is an

additional burden of proof under the Procurement Code, requiring a heightened showing

of wrongful conduct before an award can be made where public funds are at issue.

Thus, ASE contends, the Legislature’s intent was to “bring about parity with the

remedies in CASPA once bad faith is found[,]” ASE’s Brief at 28, and thus, the award

should be automatic upon that finding.

                           [J-11A-2016 and J-11B-2016] - 10
         In the alternative, ASE develops an argument that, to the extent the trial court

maintained discretion to decline an award despite a finding of bad faith, it abused its

discretion here. ASE argues that, at a minimum, a jury finding of bad faith should create

a strong presumption of entitlement to a penalty and attorney fees, and the government

should bear the burden to prove why no award should issue. In this case, ASE notes,

the trial court’s single-sentence explanation for its denial of the award did not specify

any standard used or factors considered, and the “passing reference to conflicting

testimony” regarding damages is an insufficient basis to decline to issue any award.

ASE argues such evidentiary conflicts are relevant only to the proper calculation of the

award. Citing a multi-factor test employed in other areas involving awards of attorney

fees, ASE argues consideration of such “traditional factors” weighs heavily in its favor.

See ASE’s Brief at 31, citing, e.g., Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir.

1983) (where award of attorney fees under ERISA[9] is discretionary, courts have

considered: 1) offending party’s culpability or bad faith; 2) ability of offending party to

satisfy fee award; 3) deterrent effect of award; 4) benefit conferred by award; 5) relative

merits of parties’ position). ASE concludes by requesting that, if this Court determines

the award of a penalty and attorney fees is discretionary, we should remand to the trial

court with instructions respecting the factors to be employed in deciding the issue.

         The City responds to ASE’s alternative argument by first asserting the question

whether the trial court abused its discretion is not within the scope of the issue accepted

for decision. On the merits, the City posits the decision was not an abuse of discretion

given the “gross inconsistencies” in the invoices ASE submitted for payment and ASE’s

9
    Employment Retirement Income Security Act of 1974, 29 U.S.C. Ch. 18, §1001 et seq.

                            [J-11A-2016 and J-11B-2016] - 11
failure to supply the City with “accurate” claims of amounts due for payment. In the

City’s view, the trial court cannot have abused its discretion where ASE was unable to

specify “what amounts for what work N were not properly paid.”

      We begin by addressing ASE’s waiver argument. Given the timing of the trial

court’s determination — after ASE praeciped for judgment (as was its right, given the

delay) and the cross-appeals were filed — the City was in no position to “preserve” its

issue when the matter was still before the trial court. Moreover, since the trial court

ultimately awarded ASE no statutory penalty or attorney fees despite the jury’s finding of

bad faith, the City was not aggrieved by the trial court’s decision. Indeed, the City’s

present claim did not mature until the Commonwealth Court issued its opinion reversing

the trial court and holding an award was mandatory. See, e.g., Lebanon Valley Farmers

Bank v. Commonwealth, 83 A.3d 107, 113 (Pa. 2013) (successful litigant need not file

protective cross-appeal on pain of waiver); Basile v. H&R Block, Inc., 973 A.2d 417, 422

(Pa. 2009) (appellee should not be required to file protective cross-appeal if judgment

granted relief appellee sought). Furthermore, the City objected to the submission of the

bad faith claim to the jury.      N.T. 1/22/13-1/31/13, 879, 883, 1302-13.         As the

Commonwealth Court noted in rejecting ASE’s waiver argument, by “object[ing] to the

submission of the issue of bad faith to the jury and challeng[ing] the viability of [ASE’s]

breach of contract damages at trial[,]” the City properly preserved this and other

questions relating to bad faith for review.    A. Scott Enterprises, 102 A.3d at 1066

(citations omitted). As we find the issue was not waived, we next turn to the merits.

      The issue is one of statutory construction, which is a pure question of law;

therefore, our standard of review is de novo and our scope of review is plenary.

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Lynnebrook & Woodbrook Assocs. v. Borough of Millersville, 963 A.2d 1261, 1268 n.2

(Pa. 2008). Our objective “is to ascertain and effectuate the intention of the General

Assembly.” 1 Pa.C.S. §1921(a). Often, “the best indicator of legislative intent is the

plain language of the statute.” See Freedom Med. Supply v. State Farm Fire and Cas.

Co., 131 A.3d 977, 983 (Pa. 2016), citing Commonwealth, Office of Governor v.

Donahue, 98 A.3d 1223, 1237 (Pa. 2014). Therefore, we give particular weight to the

express language of the statute.

      In reading a statute, we construe the words in accordance with the rules of

grammar and their common and approved usage or, when proper, according to their

“peculiar and appropriate” or statutorily provided meanings. 1 Pa.C.S. §1903(a); see

also Treaster v. Union Twp., 242 A.2d 252, 255 (Pa. 1968) (“Words used in a statute

are not lightly to be given a meaning other than their normal one.”); Commonwealth v.

Rieck Inv. Corp., 213 A.2d 277, 282 (Pa. 1965) (Legislature must be presumed to mean

what it has plainly expressed). “When the words . . . are [unambiguous], the letter of

[the statute] is not to be disregarded under the pretext of pursuing its spirit.” 1 Pa.C.S.

§1921(b). Generally, it is only where the words are not explicit, creating ambiguity

within the statute, that this Court will resort to other considerations to discern the

Legislature’s intent. 1 Pa.C.S. §1921(c).

      Preliminarily, we note that while this case presents in a facially clean fashion —

is the statutory language of permissive or mandatory effect? — in fact it is not so simple.

For example, the statute speaks of awards rendered by an arbitrator, Board of Claims,

or court — not awards by a jury; and, as the City notes, arbitrators, Boards of Claims,

and courts are more aware than juries of the precise monetary effect of a Section 3935

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award premised upon bad faith.          Such awareness no doubt can play into the

determination of bad faith itself in the non-jury scenario. In addition, the trial court did

not issue its determination of the penalty and attorney fees question until after judgment

was entered — the ensuing appellate dispute has thus proceeded without benefit of

argument before, or developed reasoning from, the trial court. Instead, we have a

single-sentence explanation in the trial court’s opinion. Finally, we are aware the City’s

primary Procurement Code complaint throughout the litigation focused upon the more

elemental question of whether a case of bad faith was established: the proper

consequence of a sustained finding of Procurement Code bad faith came into focus only

after the related foundational issues were resolved.

       With these complexities in mind, we turn to the statutory text. Our reading aligns

with that posed by the City.       The statute’s plain language is unambiguous and

permissive in nature: “the court may award, in addition to all other damages due, a

penalty equal to 1% per month of the amount that was withheld in bad faith,” and “the

prevailing party in any proceeding to recover any payment under this subchapter may

be awarded a reasonable attorney fee[.]”         62 Pa.C.S. §3935 (emphases added).

“Although ‘may’ can mean the same as ‘shall’ where a statute directs the doing of a

thing for the sake of justice, it ordinarily is employed in the permissive sense.”

Commonwealth v. Garland, 142 A.2d 14, 17 n.5 (Pa. 1958) (internal citations omitted);

Commonwealth v. A. M. Byers Co., 31 A.2d 530, 532 (Pa. 1943) (“The word ‘may’

clearly implies discretionary power.        The language is permissive, rather than

mandatory.”). See also Bowser v. Blom, 807 A.2d 830, 835 (Pa. 2002) (where court

“may” award costs and fees in child support proceeding, prevailing party is not

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automatically entitled to award); Treaster, supra (statute stating township “may revise its

budget” during fiscal year should not be construed to mean township was required to do

so); Pa.R.A.P. 2744 (appellate court “may award as further costs damages as may be

just” if appeal is frivolous). Cf. In re Farnese, 17 A.3d 357, 370-71 (Pa. 2011) (Election

Code provision stating court “shall” award costs “as it shall deem just” does not entitle

prevailing party to automatic award; language “contemplates a more nuanced,

calibrated decision, perhaps difficult, but not at all a strange matter for courts of

justice”).

       Additionally, although this Court has occasionally interpreted the word “may” in a

statute as mandatory, we have done so “usually where the ends of justice or

constitutional requirements so dictate.” Treaster, 242 A.2d at 255. In Hotel Casey, for

example, the Court held, notwithstanding permissive language regarding the award of a

refund of taxes paid in error, “if an application is made for a refund under §503 of the

Fiscal Code within the period of limitations fixed thereby and it appears there was a tax

paid to the Commonwealth to which the Commonwealth was not equitably or rightfully

entitled, the provision for a refund or credit is mandatory.” 23 A.2d at 741.10 The Court

acknowledged it would be “both illogical and unreasonable to assume that, when the

10
   The statute provided, “The Board of Finance and Revenue shall have the power, and
its duty shall be, (a) To hear and determine any petition for the refund of taxes, license
fees, penalties, fines, bonus, or other moneys paid to the Commonwealth and to which
the Commonwealth is not rightfully or equitably entitled, and, upon the allowance of any
such petition, to refund such taxes, license fees, penalties, fines, bonus, or other
moneys, out of any appropriation or appropriations made for the purpose, or to credit
the account of the person, association, corporation, body politic, or public officer entitled
to the refund.” 23 A.2d at 739 (quoting 72 P.S. §503). The statute also provided the
Board’s decision “shall be final,” and the lower court took this language to mean there
could be no appeal; this Court reversed that holding and allowed mandamus relief. Id.
at 743.

                            [J-11A-2016 and J-11B-2016] - 15
legislature attempted to correct a rigor of the law that caused an injustice and in so

acting made it the duty of one of its fiscal agents to determine whether a tax had been

collected to which the state was not rightfully or equitably entitled and made specific

provision for a refund or credit in the event of such a finding, it intended only such

illusory relief as would leave the granting of the refund to the unlimited discretion of the

agency.” Id. at 740. The Court continued that, “[w]hile such words as ‘authorized’ and

‘empowered’ are usually words of permission merely and generally have that sense

when used in contracts and private affairs, when they are used in statutes they are

frequently mandatory and imperative. Consequently, where a statute directs the doing

of a thing for the sake of justice the word ‘may’ means the same thing as the word

‘shall.’” Id. Notably, in concluding the government agency must refund the taxes, the

Hotel Casey Court sought to give the statute, “if possible, an interpretation which will

prevent any conflict with the Constitution.” Id.; see also In re Philadelphia Parking

Authority, 189 A.2d 746, 749 (Pa. 1963) (“may,” as used in statute providing for bond to

secure compensation for condemned real estate pursuant to constitutional mandate,

“must be construed as ‘shall,’ as mandatory rather than permissive”). Unless there are

similarly compelling reasons for interpreting “may” as “shall” here, the plain, permissive

language in Section 3935 leaves the decision to issue an award to the sound discretion

of the tribunal.

       We are not persuaded “the ends of justice or constitutional requirements . . .

dictate” we interpret the permissive language in Section 3935 as mandatory.            See

Treaster, 242 A.2d at 255. ASE has proffered no constitutional argument counseling a

construction of the language as mandatory, and we are not convinced by the position of

                            [J-11A-2016 and J-11B-2016] - 16
ASE and the Commonwealth Court that such a reading is necessary in order to “level

the playing field” between government agencies and contractors engaged in public

construction projects. In this statute creating and framing the cause of action and the

remedy, the playing field has been established by the General Assembly, and it

employed language vesting discretion in the tribunal when payment is withheld in bad

faith.

         Our determination that the statute intends to confer discretionary authority is

buttressed by the fact the General Assembly has used the term “shall” in a similar

statute like CASPA.      CASPA is effectively the prompt payment statute for private

parties, while the Procurement Code provides prompt payment rules for government

projects. See generally Clipper Pipe & Service Inc. v. Ohio Cas. Ins. Co., 115 A.3d

1278, 1283-84 (Pa. 2015) (CASPA does not apply in context of public works projects,

where owner of construction project is government agency). With regard to penalties,

Section 512(a) of CASPA states, if “an owner or subcontractor has failed to comply with

the payment terms of this act, the arbitrator or court shall award, in addition to all other

damages due, a penalty equal to [1%] of the amount that was wrongfully withheld.” 73

P.S. §512(a) (emphasis added). The General Assembly’s use of the word “shall” in

provisions in CASPA which are otherwise functionally equivalent to the terms of the

Procurement Code suggests a deliberate intention that awards of penalties and attorney

fees under the Procurement Code are within the discretion of the tribunal. Notably, a

different payment provision within the Procurement Code itself employs mandatory

language respecting a penalty for late payments, further corroborating the General

Assembly meant Section 3935 to be permissive. See 62 Pa.C.S. §3932(c) (if progress

                            [J-11A-2016 and J-11B-2016] - 17
payments are not timely made, government agency shall pay to contractor or design

professional, in addition to amount due, interest on amount due).

       Turning to whether the “ends of justice” dictate a non-literal reading of the text,

we remain unconvinced by the notion Section 3935 must be construed as mandatory.

Although we would not overstate the argument, there is some force in the City’s point

the jury’s finding of bad faith here was rendered without appreciation of the potential

ramifications of its finding; the trial court, of course, knows what the statute authorizes.

There is also some force in the argument it is rational to vest discretion in the

Procurement Code scenario, as contrasted with CASPA, since Procurement Code

awards implicate the public treasury. Resolution of the question before us does not

require inquiry into the wisdom or fairness of such a distinction and scheme; it is enough

the scheme is not such as to make it apparent the permissive term must be construed

as mandatory in order to avoid a manifestly unjust result.          Cf. generally Freedom

Medical Supply, 131 A.3d at 984, citing 1 Pa.C.S. §§1922(1), (4), and (5) (“[W]e

presume to be erroneous any interpretation that leads to an absurd or unreasonable

result, or which renders the statute ineffective or uncertain, or which favors private

interests over the public interest[.]”).

       Furthermore, it is not apparent an abuse of discretion standard in such matters is

inappropriate or unworkable. See, e.g., Lucchino v. Commonwealth, 809 A.2d 264,

269-70 (Pa. 2002) (statute stating Environmental Hearing Board “may, in its discretion”

order payment of costs and attorney fees “clearly vests broad discretion” in that body;

where record supports tribunal's finding conduct of party was dilatory, obdurate,

vexatious, or in bad faith, award of fees will not be disturbed in absence of abuse of

                              [J-11A-2016 and J-11B-2016] - 18
discretion). Accord Farnese, 17 A.3d at 370-71 (standard directing that court “shall”

award costs “as it shall deem just” “contemplates a more nuanced, calibrated decision,

perhaps difficult, but not at all a strange matter for courts of justice”).

       Prior to the Commonwealth Court’s decision in this case, both intermediate

appellate courts acknowledged a Section 3935 award is discretionary but, we

recognize, the panels nonetheless remanded for entry of an award where the trial court

or Board of Claims declined to issue one in the first instance. For example, in Dep’t of

Gen. Servs. v. Pittsburgh Bldg. Co., 920 A.2d 973 (Pa. Cmwlth.), appeal denied, 939

A.2d 890 (Pa. 2007) (“DGS”), and A.G. Cullen, supra, the Board of Claims found the

failure to comply with prompt pay requirements did not rise to the level of arbitrary and

vexatious conduct, and no statutory penalty or fees were awarded. On appeal in both

cases, however, the Commonwealth Court ruled, essentially as a matter of law, the

government agency’s conduct did constitute bad faith under Section 3935, and then

remanded for an award. DGS, 920 A.2d at 991 (remand for “proper determination of

penalty interest and attorney fees”); A.G. Cullen, 898 A.2d at 1166 (remand for award of

attorney fees on claim arising out of vexatious conduct). The Commonwealth Court’s

directive in each case followed its preliminary statement such an award is discretionary

with the trial court. DGS, 920 A.2d at 990 (“The Board’s denial of a party’s request

under Section 3935 is within its sound discretion, and we will only reverse upon a clear

abuse of discretion.”); A.G. Cullen, 898 A.2d at 1164 (“Tribunals possess great latitude

and discretion in awarding attorney’s fees when authorized by a statute.”).

       Similarly, in Pietrini, the Superior Court remanded for entry of a Section 3935

award in a case where it overturned the trial court’s holding an award was not

                             [J-11A-2016 and J-11B-2016] - 19
warranted, after finding the defendant’s conduct was vexatious. The panel noted, “even

in the presence of an undisputed factual record such as this, the award of penalties and

attorney's fees under the [P]rocurement [C]ode is an issue that under common

circumstances requires reference to existing norms of conduct. As such, the decision

remains committed to the sound discretion of the trial court, which we will reverse only

[for] a palpable abuse of discretion.” 901 A.2d at 1053. The Pietrini panel then found

the trial court abused its discretion by concluding the defendant’s conduct was not

vexatious but, rather than remand for a determination whether a penalty and attorney

fees were warranted, the panel remanded for “an assessment of penalties” and attorney

fees, thus apparently, interpreting the statute as mandating an award when bad faith is

found. Id. at 1055.

      It appears the specific question now before this Court was not squarely

presented in DGS, A.G. Cullen, and Pietrini. In each of those cases, after explaining its

disagreement with the lower tribunal’s finding on the bad faith question, the panel

remanded for entry of an award, rather than remanding for the tribunal to exercise its

discretion in light of the bad faith conduct. To the extent those decisions can be read as

being in tension with our holding, they necessarily are disapproved.

      We stress our holding that Section 3935 does not mandate an award in every

case where bad faith has been established does not mean a tribunal can arbitrarily

decline to issue an award; its determination is subject to review for abuse of discretion,

and the soundness of the decision no doubt will depend upon the persuasiveness of the

explication of the reasons for denial.       Furthermore, given the extreme conduct

                           [J-11A-2016 and J-11B-2016] - 20
necessary to support a finding of bad faith, the instances where a finding of bad faith is

deemed not to require a Section 3935 award at all presumably will be rare.11

       Contrary to the City’s suggestion, our holding that the Commonwealth Court

erred in determining an award of a penalty and attorney fees is mandatory under

Section 3935 does not end the matter. ASE, which prevailed in the Commonwealth

Court, has forwarded an alternative argument that, under the abuse of discretion

standard advocated by the City, the matter at a minimum should be remanded to the

trial court. We agree.12

       The trial court’s explanation in its Rule 1925(a) opinion that an award of a penalty

and attorney fees was unwarranted because ASE’s testimony respecting damages was

“conflicting,” without more, is insufficient to support its outright denial of an award

following the jury’s finding of bad faith. The fact of the matter is that the jury returned a

finding of bad faith based on that same “conflicting” evidence of damages and the bad

faith finding has been sustained.         ASE having anticipatorily posed a contingent

11
  We need not posit a hypothetical situation where an outright denial of an award would
be a sustainable exercise of discretion.
12
   We are unpersuaded by the City’s argument that any question of the propriety of the
trial court’s exercise of discretion is not subsumed within our grant of review. Indeed,
under what the City itself has realized are unusual procedural circumstances here, we
believe ASE is in a similar issue-preservation posture respecting its alternative
argument as the City was respecting the Commonwealth Court holding an award is
mandatory. The competing issues — is an award mandatory or not and, if not
mandatory, was there an abuse of discretion or not — should have developed with
greater specificity in the trial court, but did not for the reasons we have described in text.
Our mandate allows both parties the opportunity to develop their positions before the
trial court, including the interposition of objection premised upon waiver, at the trial level.
“The edifice of justice stands, its symmetry, to many, greater than before.” Palko v.
State of Connecticut, 302 U.S. 319, 328 (1937) (Cardozo, J.), overruled by Benton v.
Maryland, 395 U.S. 784 (1969).

                             [J-11A-2016 and J-11B-2016] - 21
argument respecting whether the court abused its discretion, the parties have engaged

in a fact-intensive dispute about the accuracy of the court’s bald assessment, as well as

the appropriate consequence if in fact there was conflicting evidence on damages.

Given the unusual procedural posture of the case, these arguments have not been

assessed in the courts below, much less have they been assessed with the sharp focus

necessary to properly frame an issue for this Court.        The proper course, in these

circumstances, is for the arguments to be made in the first instance to the trial judge

upon remand.

       Finally, ASE notes, accurately enough, the trial court did not identify any

standard used or specific factors considered in refusing the request for an award of a

statutory penalty and attorney fees.        Consequently, ASE asks that we provide a

standard to govern the remand. This too, however, is an issue best posed to the trial

court in the first instance.

       Accordingly, we hold Section 3935 of the Procurement Code allows — but does

not require — the court to order an award of a statutory penalty and attorney fees when

payments have been withheld in bad faith. The court’s determinations in this regard are

subject to review for an abuse of discretion. Therefore, we reverse the Commonwealth

Court and remand to the trial court for proceedings consistent with this Opinion. In

addition, the trial court on remand is directed to determine the amount of pre- and post-

judgment interest to be awarded in accordance with the Commonwealth Court’s

unaffected additional rulings.

       Reversed and remanded. Jurisdiction relinquished.

                               [J-11A-2016 and J-11B-2016] - 22
Chief Justice Saylor and Justices Baer, Todd and Wecht join the Opinion.

Justice Wecht files a Concurring Opinion.

Justice Donohue files a Dissenting Opinion.

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