Court Opinion

ID: 4356472
Source: CourtListenerOpinion
Date Created: 2019-01-07 14:41:03.259126+00
Date Added: 2024-06-11T14:46:23.023994
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Kobin Coal Corporation and               :
Hazleton Shaft Corporation,              :
                  Petitioners            :
                                         :
             v.                          :
                                         :
Department of General Services           :
and Department of Corrections,           :   No. 600 C.D. 2018
                  Respondents            :   Argued: December 11, 2018

BEFORE:      HONORABLE ROBERT SIMPSON, Judge
             HONORABLE PATRICIA A. McCULLOUGH, Judge
             HONORABLE CHRISTINE FIZZANO CANNON, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON                      FILED: January 7, 2019

             Kobin Coal Corporation (Kobin) and Hazleton Shaft Corporation
(Hazleton Shaft) petition this Court for review of the April 2, 2018 order issued by
the Board of Claims (Board), which entered a judgment of no award in favor of the
Department of General Services (DGS) and the Department of Corrections (DOC).
The Board concluded that Kobin and Hazleton Shaft failed to establish a claim for
constructive fraud, breach of contract and damages. Upon review, we affirm.
             The pertinent facts as found by the Board are not in dispute. Kobin and
Hazleton Shaft are Pennsylvania corporations located in Hazleton, Pennsylvania.
Findings of Fact (F.F.) 1 & 3. Kobin is an anthracite coal broker that purchases coal
from mining operations and resells the coal to purchasers, including the
Commonwealth. F.F. 2. On April 26, 2012, DGS issued an invitation for bids
(RFQ), soliciting bids to supply the anthracite and/or bituminous coal requirements
for various Commonwealth facilities for the period of July 1, 2012 to June 30, 2013.
F.F. 6. The RFQ for anthracite coal included for each Commonwealth facility a
spreadsheet listing, in part, the estimated annual usage for each facility. F.F. 7. DGS
also provided, with the bid and contract documents, a spreadsheet breaking down
the annual estimated usage for each facility, including State Correctional Institution-
Camp Hill (SCI-CH) by month, beginning with July 2012. F.F. 12. On or about
May 16, 2012, Kobin submitted its bid to supply the anthracite coal needs for 17 of
the Commonwealth facilities, including SCI-CH. F.F. 9. On July 11, 2012, DGS
awarded Kobin the contract to be a supplier of the “actual requirements” of
anthracite coal for several of the facilities, including SCI-CH, for the initial term of
July 1, 2012 through June 30, 2013. F.F. 10 & 14. The contract specified that:

             It shall be understood and agreed that any quantities listed
             in the [c]ontract are estimated only and may be increased
             or decreased in accordance with the actual requirements
             of the Commonwealth and that the Commonwealth in
             accepting any bid or portion thereof, contracts only and
             agrees to purchase only the materials and services in such
             quantities as represent the actual requirements of the
             Commonwealth. The Commonwealth reserves the right to
             purchase materials and services covered under the
             [c]ontract through a separate competitive procurement
             procedure, whenever Commonwealth deems it to be in its
             best interest.

V.11 CONTRACT-007.02 Estimated Quantities (Nov. 30, 2006); Reproduced
Record (R.R.) 54 (emphasis added). The estimated quantity of “Barley” coal
required by SCI-CH for the contract period was 13,600 tons at the contract price of
$183 per ton. F.F. 15. Kobin submitted with its bid a commitment letter from
                                           2
Hazleton Shaft dated May 23, 2012, by which Hazleton Shaft agreed to provide
Kobin with up to 20,000 tons of Barley coal as required by the contract. F.F. 18. To
assure that it had an adequate source of Barley coal to fulfill its commitment under
the 2012-2013 contract, Kobin executed a purchase order on July 25, 2012 with
Hazleton Shaft to provide the coal for Kobin’s contract with DGS, as available. F.F.
22. The contract provided that the Commonwealth, through DOC, was to issue a
purchase order when it required coal for the facility, F.F. 23; R.R. 32, and Kobin had
to provide DOC with the required quantity requested in the purchase order within 30
days. F.F. 23. Pursuant to this procedure, Kobin made monthly deliveries to SCI-
CH in July, August and September 2012, totaling 1,477 tons, 123 tons short of the
estimated usage for these months. F.F. 24.
             At all times relevant to the contract, DOC required coal to fuel two
Boilers located at SCI-CH, Boiler #2 and Boiler #3, which were installed in
approximately 1938, but SCI-CH also had two oil-fueled boilers on the premises.
F.F. 25. Boiler #3 had not been operational since March 28, 2012, prior to DGS
issuing the RFQ on April 26, 2012. See F.F. 26. However, Boiler #2 was operational
but in need of repair when DGS solicited bids in April 2012 through mid-July 2012
when DGS awarded Kobin the contract. F.F. 39. As DGS was engaged in the
bidding process on the contract, the utility plant supervisor at SCI-CH, Matthew W.
Klopotek (Klopotek), commenced obtaining estimates for repairs to Boilers #2 and
#3. F.F. 27-29.
             On June 20, 2012, Klopotek received estimates for repairs to Boilers #2
and #3 from Trojan Boiler Service (Trojan), dated June 11, 2012, to perform required
repairs to Boiler #2 at a cost of $536,000. F.F. 27. Klopotek received from Munroe,
Inc. of Pittsburgh separate estimates to: rebuild/refurbish coal Boiler #3 for

                                          3
$1,400,000 and provide a natural gas boiler to replace one or both coal Boilers for
$950,000. F.F. 28. On July 23 and 24, 2012, Klopotek received estimates from two
other companies to replace a coal boiler, and an estimate to provide to SCI-CH a
rental boiler capable of burning fuel oil or natural gas. F.F. 29-30. Because the
estimates exceeded $300,000, DGS and DOC would need to obtain a capital
appropriation by the General Assembly to complete the repairs to the Boilers. F.F.
63.1
               On July 31, 2012, Boiler #2 was shut down due to problems with a
conveyance system that had been installed in 2008. F.F. 31 & 40. Through the
summer of 2012, the condition of Boiler #2 continued to be investigated. F.F. 41.
Between September 26-28, 2012, Trojan conducted an inspection of Boiler #2 to
determine the full nature of the problems, what repairs were needed, and whether
the Boiler could be operated. F.F. 43. On September 28, 2012 and October 1, 2012,
the Chief Engineer for DOC, Norm Klinikowski, P.E. (Klinikowski), and the facility
maintenance manager at DOC, Howard Gouse (Gouse), exchanged emails regarding
the state of operations of the Boilers. F.F. 44. The email exchanges revealed, in
pertinent part, that: (1) Boiler #3 was not operational and would not be available for
the 2012 heating season; (2) “[B]and-Aid” repairs were not possible to Boiler #3 due
to extensive damage to the Boiler’s tubes; (3) Boiler #2 required repairs to the stoker
that would take approximately three months and cost approximately $300,000 in
parts; (4) although Boiler #2 could be made operational to get through the winter
season by replacing some wear parts, all wear parts on the stoker would need to be
replaced in the off-season; and (5) with both coal Boilers requiring repair, “coal use

       1
         If an agency has a project that requires an expenditure in excess of $300,000, then the
agency must obtain authorization for the expenditure by action of the General Assembly. 10/4/17
Notes of Testimony (N.T.) at 125.
                                               4
would drop by 80% to 1,800 tons.” F.F. 44. On September 30, 2012, Klinikowski
sent an email to the Director of the DGS Bureau of Engineering and Architecture to
inform him that the preceding Friday (September 28, 2012), DOC had “just found
out about a development with the coal burners that may affect their ability to operate
for the next two or three months.” F.F. 45.
             On October 4, 2012, Trojan submitted to Klopotek of SCI-CH a report
on the September 26-28 inspection of Boiler #2, which revealed that it was in
“operational condition” but it was experiencing a number of problems that required
attention and for which repairs were possible at an estimated cost of $500,000. F.F.
46. With the repairs, Trojan concluded, through its inspector, that Boiler #2 could
be run as is, though it was not known for how much longer. F.F. 46. On October 5,
2012, Klinikowski sent an email to personnel at DGS, including commodity
specialist George Landis (Landis) and commodity manager for procurement
Gregory Knerr (Knerr), notifying them that it is likely that SCI-CH would be using
more fuel oil rather than coal because “[r]ight now, Camp Hill cannot burn coal.”
F.F. 48.   Landis replied to Klinikowski’s email on October 5, 2012, seeking
additional information on the situation with the coal because “[i]f we are not burning
coal or a reduced amount then I need to inform the supplier” and “[t]he supplier has
dollars at risk if we take no coal so we need to provide them [sic] a reduced estimated
[sic].” F.F. 49.
             On October 22, 2012, Landis sent a follow up email to Klinikowski and
Gouse, with copies sent to Knerr and others, asking if “we have an update on the
coal situation at Camp Hill?” F.F. 50. Gouse of DOC replied, stating “please contact
Kobin Coal, and let them know we won’t be taking any coal through December at a
minimum” and “I cannot give you a firm date to resume any coal deliveries at this

                                          5
time.” F.F. 51. Gouse further indicated to Landis that “we had no way to predict
that we would be dealing with a problem this long with respect to the coal silo
project, as well as dealing with the tube failures and associated wear on equipment.”
F.F. 51. In response, on October 22, 2012, Landis emailed the vice president of
Kobin, Daniel Nester (Nester), and another employee of Kobin, Alexander Oren
(Oren), advising them, “the facility will not be taking coal through December, 2012
and they cannot provide a start-up date at this time.” F.F. 52.
              After receiving Landis’s October 22, 2012 email, Nester informed the
president and owner of Hazleton Shaft, George Roskos (Roskos), that SCI-CH
would not be taking any more deliveries of coal through December due to problems
with the coal Boilers. F.F. 56. On November 13, 2012, an environmental engineer
manager consultant for DOC sent a letter to the environmental engineer at the
Department of Environmental Protection stating that Boiler #3 had been deactivated,
Boiler #2 required repairs to be operational, and SCI-CH was operating the oil-
fueled boilers that would be supplemented with an additional oil-fueled boiler to
supplement SCI-CH’s heating capacity in lieu of using Boiler #2.2 F.F. 57. On
November 21, 2012, Gouse sent an email to Landis of DGS informing him that
Boiler #3 was in the process of being deactivated, Boiler #2 was in need of repairs
and DOC did not “anticipate any coal deliveries to SCI-CH until at least February.”
F.F. 59.
              On November 26, 2012, Landis sent an email to Nester and Oren at
Kobin, advising them that “SCI-CH does not anticipate taking any coal deliveries
until at least February 2013” and “we are reducing the annual estimate at SCI Camp
Hill by 4,100 tons to 9,500 tons.” F.F. 60. Attached to the email, Landis included a

       2
        The Board noted that this was the earliest documentary evidence that a decision had been
made to add an additional oil-fueled boiler in lieu of using Boiler #2. F.F. 57.
                                               6
revised estimate sheet showing estimated coal deliveries from July 2012 through
June 2013 totaling 9,500 tons. F.F. 61. Although the text of Landis’s email indicated
that there would be no coal deliveries until at least February, the revised estimate
sheet incorrectly included an estimated delivery of 1,800 tons in January 2013. F.F.
62. Even if DGS and DOC had capital funding in place to perform all the extensive
repairs, and an appropriation of the General Assembly would not be necessary, the
work could not have been completed before the end of the contract period because
“it would be a better part of a year” before a contractor could be on site to be able to
do something.3 F.F. 64; 10/4/17 Notes of Testimony (N.T.) at 160.
              On December 7, 2012, Gouse sent a detailed email to SCI-CH
superintendent, Laurel Harry, to report that Boiler #2 must have the “stoker/traveling
grates” rebuilt at a cost of $593,750 and Boiler #3 requires more extensive work at
a cost of over $1,400,000. F.F. 67. Gouse further reported that SCI-CH is burning
fuel oil in the two operating oil boilers and an additional rental oil boiler is in place
but not yet operational pending action on several bids to install and connect it. F.F.
67.
              On December 24, 2012, Landis made a request to the facilities that burn
coal, including SCI-CH, to notify DGS if they planned to deviate from their annual
estimates by more than 10% during the contract year. F.F. 70. At this point, total
actual coal delivery to SCI-CH included only 1,447 tons through October 2012. F.F.
71. Shortly thereafter, on January 22, 2013, a state senator convened a meeting to
address coal usage by DOC, including SCI-CH. F.F. 74. At the January 22, 2013
meeting, a representative of DOC told Kobin’s Nester that “SCI-CH would not be

       3
          We note that DOC eventually obtained funding from the General Assembly for the boiler
repairs on November 1, 2013, though the request (via Senate Bill 680, Printer’s Number 998) did
not get introduced until March of 2013. See Kobin and Hazleton Shaft’s Exhibit (Ex.) 35.
                                              7
ordering any more coal deliveries for the remainder of the 2012-2013” contract
period. F.F. 77. Shortly after this meeting, Nester informed Hazleton Shaft that a
DOC representative had said at the meeting that SCI-CH would not be ordering any
more coal for the contract period. F.F. 78. SCI-CH did not order any coal deliveries
after September 2012. F.F. 82.
               On August 30, 2013, Kobin and Hazleton Shaft filed a Claim for
Determination with DGS seeking permission to ship a minimum of 9,500 tons of
anthracite coal to an SCI location other than SCI-CH at the price agreed to by the
contract. Claim for Determination ¶ 17. DGS, through its Chief Procurement
Officer, denied the request by letter dated December 20, 2013, explaining, “I have
reviewed the [c]laim and have found no basis for granting relief under the
[c]ontract.”    12/20/13 Correspondence by Chief Procurement Officer, Michael
Richart.
               On January 6, 2014, Kobin and Hazleton Shaft filed a Statement of
Claim with the Board against DGS and DOC alleging five counts, including
constructive fraud and breach of contract.4 To support the count for constructive
fraud, Kobin and Hazleton Shaft alleged that DGS and DOC represented that
approximately 13,600 tons of coal would be supplied to SCI-CH per the contract.
Statement of Claim ¶ 28. Kobin and Hazleton Shaft alleged that DGS and DOC
made material “representations” in October and November of 2012 regarding the
condition of the coal Boilers and the quantity of anthracite coal that SCI-CH required

       4
          The three other counts included negligent misrepresentation, promissory estoppel and a
claim for penalties and attorneys’ fees. The Board explained that it had no jurisdiction over the
tort claim of negligent misrepresentation. Counsel for Kobin and Hazleton Shaft acknowledged
that the claim for promissory estoppel was based on settlement discussions, substantial evidence
of which would largely be inadmissible at hearing. Board Opinion at 27, n.4. Kobin and Hazleton
Shaft do not challenge the Board’s decision not to address these counts.

                                               8
pursuant to the contract. Id. ¶¶ 29-30. Kobin and Hazleton Shaft alleged that the
representations made by DGS and DOC were “false and/or misleading” and caused
Kobin and Hazleton Shaft financial harm in the amount of $890,800 “together” with
interest and costs of suit. Id. ¶¶ 33 & 36. To support the claim for breach of contract,
Kobin and Hazleton Shaft alleged that DGS and DOC issued a “revised estimate
sheet” on or about November 26, 2012, which reduced the annual estimate of
anthracite coal at SCI-CH to 9,500 tons. Id. ¶ 47. DGS and DOC did not issue any
additional revised estimate sheets during the contract term for SCI-CH, nor did they
issue a purchase order to ship 9,500 tons of anthracite coal prior to the expiration of
the contract, thereby breaching the contract, causing Kobin and Hazleton Shaft to
suffer a loss of $622,250 under the contract. Id. ¶ 50.
               DGS and DOC filed an answer denying the allegations and new matter.
In the new matter, DGS and DOC asserted that they did not have a contract with
Hazleton Shaft and, therefore, Hazleton Shaft is not a proper party.5 New Matter ¶
1. DGS and DOC further averred that the contract, by its terms, did not require them
“to commit to purchase the estimated quantities of coal identified in that contract.”
New Matter ¶ 9.            Finally, DGS and DOC denied that they made “any
representations” that misled Kobin and Hazleton Shaft “into believing that they were
guaranteed that any specific amount of coal would be ordered by DGS and DOC”
and requested judgment in their favor. New Matter ¶ 10.

       5
         In the new matter, DGS and DOC stated that they did not object to having Hazleton Shaft
as a party for convenience in presenting the claims but also indicated that they do not waive their
objections that it is an improper party because there is no privity of contract between DGS, DOC
and Hazleton Shaft. Answer and New Matter ¶ 2.

                                                9
               After a hearing on the matter on April 2, 2018, the Board entered
judgment of no award in favor of DGS and DOC. In so ordering, the Board
concluded:

               Having found insufficient factual basis for [Kobin and
               Hazleton Shaft’s] claim on the theory of constructive
               fraud; no breach of the July 11, 2012 [c]ontract for a
               failure of either an implied duty of good faith or of the
               statutory duty of good faith imposed on the [c]ontract by
               [Section 1304 of the Pennsylvania Uniform Commercial
               Code, 13 Pa. C.S. § 1304]; and insufficient evidence to
               calculate [Kobin and Hazleton Shaft’s] damages with
               reasonable certainty in any event, it is unnecessary to
               address the issue of whether or not Hazleton Shaft is an
               intended third-party beneficiary of the [c]ontract.

Board Opinion at 52. Kobin and Hazleton Shaft petition this Court for review.6

               I. Constructive Fraud

               On appeal, Kobin and Hazleton Shaft argue that the Board erred when
it concluded that they did not meet their burden of proving that DGS and DOC
committed constructive fraud with respect to the original 13,600-ton coal usage
estimate. Kobin and Hazleton Shaft’s Brief at 15. To establish a claim for
constructive fraud, an aggrieved contractor must satisfy the following five-part test:

               (1) Whether a positive representation of specifications
               or conditions relative to the work is made by the
               governmental agency letting the contract or its engineer.

       6
         On review of a decision from the Board of Claims, this Court’s scope of review is limited
to determining whether constitutional rights have been violated, an error of law has been
committed, or findings of fact are supported by substantial evidence. Dep’t of Gen. Servs. v.
Pittsburgh Bldg. Co., 920 A.2d 973 (Pa. Cmwlth. 2007). This Court reviews the interpretation of
contractual provisions as a question of law. Id.
                                               10
               (2) Whether this representation goes to a material
               specification in the contract.

               (3) Whether the contractor, either by time or cost
               restraints, has no reasonable means of making an
               independent investigation of the conditions or
               representations.

               (4) Whether these representations later prove to be
               false and/or misleading either due to actual
               misrepresentation on the part of the agency or its engineer
               or, by what amounts to a misrepresentation through
               either gross mistake or arbitrary action on the part of the
               agency or its engineer.

               (5) Whether, as a result of this misrepresentation, the
               contractor suffers financial harm due to his reliance on the
               misrepresentation in the bidding and performance of the
               contract.

Acchione and Canuso, Inc. v. Dep’t of Transp., 461 A.2d 765, 768 (Pa. 1983)
(emphasis added). The Board concluded that Kobin and Hazleton Shaft failed to
meet their burden to prove element four, with regard to the original estimate of
13,600 tons,7 and element five as explained in more detail below.

       7
         The Board did find that element four was satisfied as to the revised estimate of 9,500
tons. Specifically, the Board concluded: “Given DOC’s assessment of Boiler #2’s capabilities on
or about November 26, 2012, as well as the lack of communication between DOC and Mr. Landis,
we conclude that Mr. Landis’s revised estimate of 9,500 tons amounts to a misrepresentation
through gross mistake or arbitrary action by him as a representative of DGS and agent of DOC.”
Board Opinion at 43. The Board explained that Landis provided this estimate when SCI-CH’s
Boiler #3 had been deactivated; Boiler #2 required repairs to be operational and the
communications by DOC internally stated that coal use will drop by 80% to 1,800 tons; and DOC
had made arrangements to add an oil-fired boiler until Boiler #2 could be operational. Id. at 42-
43. These facts, combined with the knowledge that the repairs could not be done without
following processes to fund and perform the repairs, established that DOC knew that the repairs
could not be completed by the end of the contract period. Id. at 43.
                                               11
            A. Misrepresentation Through Gross Mistake or Arbitrary Action

            The Board concluded that Kobin and Hazleton Shaft failed to meet their
burden of showing that the estimate of 13,600 tons for SCI-CH initially provided in
the bid documents and contract, which later proved to be inaccurate, was made as a
result of an “actual misrepresentation,” or by what amounts to a misrepresentation,
through “gross mistake or arbitrary action.” Board Opinion at 40. In so concluding,
the Board reasoned:

            [t]he evidence produced clearly established that the initial
            usage estimate of 13,600 tons of coal for SCI-CH turned
            out to be false and wholly inaccurate, but failed, in our
            view, to establish that the estimate resulted from an actual
            misrepresentation (i.e. a representation known to be false
            at the time) or one made by reason of gross mistake or
            arbitrary action. To the contrary, while [Kobin and
            Hazleton Shaft] did show that Boiler #3 was not, and likely
            would not be, operational from March 2012 onward, the
            evidence adduced at hearing indicated that Boiler #2, the
            remaining coal boiler, was operational at the time the
            [c]ontract was bid and signed in the April to mid-July 2012
            time frame. Moreover, while the status of Boiler #2 was
            arguably uncertain during this time period, no evidence
            was provided to show that the effect of these boiler issues
            on SCI-CH’s estimated coal usage of 13,600 ton for the
            [c]ontract period could have been quantified at that time .
            . . [Kobin and Hazleton Shaft] also failed to produce any
            persuasive evidence that [DGS and DOC] had decided
            during the bidding, contracting or even in the early stages
            of the [c]ontract [p]eriod, to forego the use of coal as a heat
            source for SCI-CH.
Board Opinion at 40-41.
            Kobin and Hazleton Shaft contend that the Board erred because the
facts, as found by the Board, show that DOC knew prior to the contract period that

                                          12
Boilers #2 and #3 were not likely operational and that there were problems with the
Boilers that would impact the coal usage. Kobin and Hazleton Shaft’s Brief at 17.
Kobin and Hazleton Shaft assert that DOC had notice that the two Boilers were not
likely to be operational during the contract period (commencing July 1, 2012). Id.
In support, Kobin and Hazleton Shaft rely on the following facts: March 28, 2012
was the last date that Boiler #3 had been in operation; on June 11, 2012, DOC
received an estimate for repairs for Boiler #2; on June 20, 2012, DOC received two
quotes with respect to Boiler #3 to refurbish it; and DOC knew that it could take two
years to obtain funding for the project due to budget challenges. Id. at 17-18. As of
July 2012, DOC had not commenced the process to obtain the necessary funding.
Id.
             DGS and DOC counter that the Board did not err because, while the
Board noted that the initial estimate of anticipated coal usage by SCI-CH later
proved inaccurate, the evidence failed to establish that the estimated quantity
resulted from a misrepresentation, gross mistake or arbitrary action. DGS and
DOC’s Brief at 7. The evidence established that Boiler #2 was operational at the
time of contract bidding and execution and, notwithstanding the problems with the
coal-burning Boilers, DOC always intended to continue and/or resume burning coal
at the facility during the contract term. Id. Finally, DGS and DOC noted that the
contract allowed the Commonwealth to increase or decrease the quantities of coal
as needed. Id.
             Upon review, we do not find error with the Board’s conclusion that
Kobin and Hazleton Shaft failed to meet their burden to show that the original
13,600-ton coal estimate was an “actual misrepresentation” or “misrepresentation
through either gross mistake or arbitrary action.” Board Opinion at 40. As explained

                                         13
by the Board, though Boiler #3 was not operational at the time of contracting, DOC
ordered coal for the months of July, August and September 2012 in amounts close
to the estimated amounts. Board Opinion at 32; F.F. 24; Kobin and Hazleton Shaft’s
Exhibit (Ex.) 5. DOC received estimates for repairs on the Boilers that summer and
continued to use Boiler #2 during that time until the fall when Boiler #2 ceased to
operate and both Boilers required extensive repairs “to the stokers and tubes” and
associated wear on the equipment. Kobin and Hazleton Shaft’s Ex. 8. DOC did not
have definitive information that Boiler #2 was not operational and required extensive
repairs, such that it had to switch to using the oil-fueled boiler, to supplement the
heating capacity until Fall 2012. Kobin and Hazleton Shaft’s Ex. 29 (The Bureau of
Operations Environmental Engineer explained that two oil-fueled boilers are
operating within the permit guidelines and DOC will use “an additional [oil-fueled]
[b]oiler through the winter season, until the Coal Boiler #2 can be repaired and made
operational.”). Thus, we find that the Board’s determination that the original 13,600-
ton coal estimate was not an “actual misrepresentation” or “misrepresentation
through either gross mistake or arbitrary action on the part of the agency or its
engineer” is supported by substantial evidence.

             B. Suffered Financial Harm due to Reliance on Misrepresentation

             With respect to damages, the Board concluded that Kobin and Hazleton
Shaft failed to establish the fifth element of its constructive fraud claim, i.e., they
failed to establish that they actually suffered financial hardship due to their reliance
on the misrepresentation in Landis’s November 26, 2012 email or on any of the
alleged misrepresentations. Board Opinion at 44. The Board found that although
Kobin and Hazleton Shaft submitted calculations to represent alleged financial harm,

                                          14
those calculations were based on lost profits (the difference between gross sales per
the contract and subsequent sales) rather than “reliance damages” as required to
establish a claim for constructive fraud. Id. at 45.
             Kobin and Hazleton Shaft contend that the Board erred because their
“lost profits” support a conclusion of financial harm. Kobin and Hazleton Shaft’s
Brief at 21. Kobin and Hazleton Shaft argue that by “having reasonably relied upon
the [r]evised [e]stimate of 9,500 tons,” they also “suffered additional financial losses
as a result of producing and stockpiling [B]arley coal for SCI Camp Hill, which it
wouldn’t have otherwise done.” Id. DGS and DOC respond that Kobin and
Hazleton Shaft have “failed to establish their actual reliance and/or entitlement to
rely upon the alleged misrepresentations by DGS and DOC.” DGS and DOC’s Brief
at 12. DGS and DOC further claim that the contract language regarding estimated
quantities makes “clear” that Kobin and Hazleton Shaft were not entitled to rely
upon any estimated quantities. Id.
             To obtain damages, the contractor, Kobin, must prove that as a result
of the misrepresentation by DGS, Kobin suffered financial harm “due to [its]
reliance on the misrepresentation” in the performance of the contract (emphasis
added). Acchione and Canuso, Inc., 461 A.2d at 768. In considering this issue, our
court has considered the unanticipated “increased expenses” incurred by a contractor
to complete the project, which it had contracted to perform, as the financial harm
brought on by the agency’s misrepresentation. See Dep’t of Gen. Servs. v. Pittsburgh
Bldg. Co., 920 A.2d 973, 985 (Pa. Cmwlth. 2007) (reliance on the agency’s
statements regarding the suitability of soil conditions caused the contractor to incur
increased expenses to complete the project, i.e., the financial harm, because the
contractor had to address unanticipated rocky conditions to complete the project);

                                          15
Acchione and Canuso, Inc. 461 A.2d at 769 (holding that contractor entitled to
recover for damages where increased expenses incurred by contractor were a “direct
result” of the reliance on the misrepresented bid specification).
               At the Board hearing, Kobin produced no evidence showing that it
acted in reliance on Landis’s email, i.e., that it had ordered coal from Hazleton Shaft
following his November 26, 2012 email or that Hazleton Shaft stockpiled the coal
to meet Landis’s November 26, 2012 revised estimate of 9,500 tons. R.R. 241-42.
Kobin did not order coal during that period because it received no purchase orders
from DOC after September. F.F. 82.
               Further, Roskos, president and owner of Hazleton Shaft, testified as to
damages8 at the hearing for both Kobin and Hazleton Shaft.9 Roskos testified that
as soon as he made the commitment to Kobin under the contract, he started putting
tonnage on the ground to ensure that Hazleton Shaft had the amount of tons
necessary to meet the contract terms based on the schedule. R.R. 241 & 247. Roskos
could not say exactly how much coal he had in stockpile because he had produced
coal for the contract, as well as to have available for other opportunities. R.R. 241-
42 & 245. Roskos testified that he produced the coal at $105 per ton and, in 2014,
sold 40 tons for $150 per ton and 9,460 tons for $115 per ton, both in excess of
production costs. R.R. 228-29. Though Hazleton Shaft sold the coal at a price less
than DGS and DOC agreed to pay under the contract (at $183 per ton), Hazleton

       8
          The testimony on the damages consisted of “combined” amounts for both Kobin and
Hazleton Shaft. R.R. 230. Roskos testified that it is a combination of damages because there is
a portion that Kobin “had for their [sic] profit in this as well” and that “my $155 a ton that I was
selling to Kobin, at, [sic] the rest is his, between $155 and $170.” R.R. 230.
       9
         We agree that the Board did not address the question of Hazleton Shaft’s standing;
however, there is no need to remand on this issue because, as explained herein, the substantive
claims cannot stand.
                                                16
Shaft still realized a profit, albeit, not as great a profit as it expected to receive under
the contract. Roskos testified that the loss was “opportunity cost.” R.R. 248. Kobin
and Hazleton Shaft did not realize as much of a financial gain as they hoped or
anticipated under the contract, but they produced no evidence to show that they
incurred a “financial harm” in relying upon the alleged misrepresentation to support
a claim for constructive fraud.10

                II. Breach of Duties of Good Faith and the Doctrine of Necessary
                    Implication

                Kobin and Hazleton Shaft next contend that the Board erred by failing
to find that DGS and DOC had breached their duties of “good faith” in the
performance of the contract. Kobin and Hazleton Shaft’s Brief at 22. Kobin and

       10
            The Board further stated with regard to [Kobin and Hazleton Shaft’s] claimed damages:

                we encounter problems in trying to quantify [Kobin and Hazleton
                Shaft’s] damages on the evidence presented. For one thing, the
                mistaken representation on November 26, 2012 that SCI-CH still
                expected to use 9,500 ton for the [c]ontract period was corrected at
                the January 22, 2013 meeting, and we simply do not see adequate
                evidence from which to ascertain what damages [Kobin and
                Hazleton Shaft] suffered during the time period this
                misrepresentation was in effect. Furthermore, based on the evidence
                provided, it would appear that [Kobin and Hazleton Shaft] had an
                opportunity to mitigate their claimed damages by attempting to sell
                any Barley coal that was stockpiled beginning in January 2013
                rather than waiting until April, May or June of 2013 when the
                market, in their words, ‘collapsed’ but failed to act on this
                opportunity. Because [Kobin and Hazleton Shaft] did not act to
                mitigate damages by attempting to sell any such stockpiled coal
                promptly after the January 22, 2013 meeting, we find this to be an
                additional unknown in any attempt to arrive at a damages amount
                owing to [Kobin and Hazleton Shaft] without engaging in
                speculation or conjecture.

Board Opinion at 51-52.

                                                17
Hazleton Shaft assert that there is an “implied” duty of good faith and fair dealing
that DGS and DOC had to abide by, Section 205 of the Restatement (Second) of
Contracts (Am. Law Inst. 1981), and further assert that the Board erred in failing to
find a violation of Section 2306(a) of the Pennsylvania Uniform Commercial Code
(UCC), 13 Pa. C.S. § 2306(a). Kobin and Hazleton Shaft’s Brief at 23 & 26. Finally,
Kobin and Hazleton Shaft claim that the doctrine of necessary implication gives rise
to implied terms of the contract concerning requirements for the purchase of coal
and communication between the parties. Id. at 33 & 35.
                DGS and DOC counter that Kobin and Hazleton Shaft have failed to
identify a duty that they breached under the contract and, instead, rely upon “the
implied duty of good faith and fair dealing and the doctrine of necessary implication
in an effort to impose nonexistent duties” upon DGS and DOC that are “contrary”
to the nature and terms of the requirements contract mutually entered into between
the parties. DGS and DOC’s Brief at 16. To that end, DGS and DOC assert that the
implied duty of good faith and the doctrine of necessary implication are not
applicable here and that they acted in good faith pursuant to the Pennsylvania UCC.
Id. at 17-18.
                  In claiming that DGS and DOC breached the duty of good faith and
fair dealing, Kobin and Hazleton Shaft specifically assert that, under a requirements
contract, the reasonable expectation would be that the actual requirements would
closely approximate the estimated tonnages for which Kobin bid. Kobin and
Hazleton Shaft’s Brief at 23. Once DGS and DOC became aware of the problem,
they could have given notice of a force majeure event11 or fully informed Kobin of

       11
         Upon review of the contract, the provision relating to a “force majeure” event does not
address equipment failure; rather, it speaks to acts of God, civil disorders, and other like events.

                                                18
the degree of the problems earlier to enable Hazleton Shaft to stop stockpiling the
coal and protect itself from damages. Id. at 24 & 31. Kobin and Hazleton Shaft
assert that DGS and DOC should have: notified them every step of the way from
the pre-bid teleconference that Boiler #3 was not in operation; provided the receipt
of estimates by DOC to get the repairs done to Boilers #2 and #3; and, of course,
included them in the communications between DGS and DOC in the fall of 2012.
Kobin and Hazleton’s Brief at 28-31.

               A. Implied Duty of Good Faith: Section 205 of the Restatement
                  (Second) of Contracts

               Section 205 of the Restatement (Second) of Contracts provides that
“[e]very contract imposes upon each party a duty of good faith and fair dealing in
its performance and its enforcement.” Restatement (Second) of Contracts § 205
(Am. Law. Inst. 1981); Agrecycle, Inc. v. City of Pittsburgh, 783 A.2d 863, 867 (Pa.
Cmwlth. 2001). The Board concluded that the implied duty of good faith cannot be
employed here, relying on this Court’s decision in Agrecycle, Inc., because Kobin

Even if it was applicable to equipment failure, the provision places a duty on the contractor, not
the Commonwealth, to give notice of the event. R.R. 61. The Force Majeure provision provides:

                       Neither party will incur any liability to the other if its
               performance of any obligation under this Contract is prevented or
               delayed by causes beyond its control and without the fault or
               negligence of either party. Causes beyond a party’s control may
               include, but aren’t limited to, acts of God or war, changes in
               controlling law, regulations, orders or the requirements of any
               governmental entity, severe weather conditions, civil disorders,
               natural disasters, fire, epidemics and quarantines, general strikes
               throughout the trade, and freight embargoes.

V.31 CONTRACT-022.1 Force Majeure (Oct. 2006), R.R. 61 (emphasis added). The provision
further provides the notice requirements for the contractor to abide by and allows the
Commonwealth to cancel the contract. Id.

                                               19
and Hazleton Shaft sought to use the implied duty of good faith to change the
contract terms. Board Opinion at 48. The Board explained that Kobin and Hazleton
Shaft were attempting to transform the contract into one where DGS and DOC were
required to take their estimated coal requirements instead of, as the contract
provided, their actual coal requirements. Id. Upon review, we agree.

             The courts have defined the duty of “good faith” as
             “[h]onesty in fact in the conduct or transaction
             concerned,” adopting the definition set forth in Section
             1201 of the [UCC], as amended, 13 Pa. C.S. § 1201 . . .
             The good faith obligation may be implied to allow
             enforcement of the contract terms in a manner that is
             consistent with the parties’ reasonable expectations . . . In
             Pennsylvania, the courts have recognized the duty of good
             faith only in limited situations . . . the duty of good faith
             may not be implied where (1) a plaintiff has an
             independent cause of action to vindicate the same rights
             with respect to which the plaintiff invokes the duty of good
             faith; (2) such implied duty would result in defeating a
             party’s express contractual rights specifically conveyed in
             the written contract by imposing obligations that the party
             contracted to avoid; or (3) there is no confidential or
             fiduciary relationship between the parties.

Agrecyle, Inc., 783 A.2d at 867-69 (holding that to impose a duty on the city to
deliver material “estimated” in bid specifications when agreement provided that the
city would not “warrant or guarantee the quantity” or quality of the compostable
materials to be delivered by the city would disregard the unambiguous language in
agreement defeating the intention of the parties); see Cable & Assocs. Ins. Agency,
Inc. v. Commercial Nat’l Bank of Pa., 875 A.2d 361, 364 (Pa. Super. 2005) (holding
that appellee’s decision to exercise its contractual rights against appellants to retain

                                          20
a security interest in appellants’ property cannot, as a matter of law, constitute a
breach of contractual good faith).
              Here, Kobin and Hazleton Shaft’s complaint is that DGS and DOC
caused them harm by not issuing a “purchase order directing [Kobin] and [Hazleton
Shaft] to ship 9,500 tons of anthracite coal to SCI Camp Hill prior to the expiration
of the [c]ontract which was a breach of the [c]ontract.” Statement of Claim ¶ 49,
R.R. 8. As explained by the Board, the contract by its terms required DGS and DOC
to purchase the coal as needed, not as estimated. R.R. 54. This Court cannot imply
a duty on DGS and DOC to purchase estimated amounts of coal when the contract,
by its terms, provided that DGS and DOC contract and agree to purchase “only the
materials . . . in such quantities as represent the actual requirements of the
Commonwealth.” R.R. 54 (emphasis added); Agrecycle, Inc., 783 A.2d at 868.

              B. Good Faith in Commercial Contracts: Section 2306 of the UCC

              The parties, here, however, agree that Section 2306(a) of the
Pennsylvania UCC governs the contract at issue and provides:

              (a) Quantity measured by output or requirements. —A
              term which measures the quantity by . . . the requirements
              of the buyer means such actual output or requirements as
              may occur in good faith, except that no quantity
              unreasonably disproportionate to any stated estimate to
              any normal or otherwise comparable prior output or
              requirements may be tendered or demanded.

13 Pa. C.S. § 2306(a) (emphasis added).12 Though this provision requires the parties
to perform their duties and to enforce commercial contracts in “good faith,” our

       12
         According to the accompanying UCC Comment, “[i]f an estimate of … requirements is
included in the agreement, no quantity unreasonably disproportionate to it may be tendered or

                                             21
Supreme Court recently held that the breach of duty does not “create a separate cause
of action.” Hanaway v. Parkesburg Grp., L.P., 168 A.3d 146, 157 (Pa. 2017).
Rather, the failure to perform a specific duty or obligation under the contract
constitutes a “breach of that contract.” Id. The “doctrine of good faith merely directs
a court towards interpreting contracts within the commercial context in which they
are created, performed, and enforced, and does not create a separate duty of fairness
and reasonableness which can be independently breached.” Id.
               As applied here, the Board explained that Section 2306(a) of the
Pennsylvania UCC controls and imposes good faith “in determination of the buyer’s
actual requirements, not in making gratuitous estimates.” Board Opinion at 49. To
this end, the Board explained that it did not:

               see the evidence as supporting a claim for lack of good
               faith on the part of DGS or DOC as a matter of fact.
               Although we believe Mr. Landis’s estimate of 9,500 ton
               was made arbitrarily (without factual support) it is clear to
               us that he was motivated by a good faith desire to keep
               Kobin apprised of the circumstances at SCI-CH as best he
               could. Moreover, while DOC coal requirements estimates
               were incorrect, [Kobin and Hazleton Shaft] have not
               provided the Board with sufficient evidence to establish
               their coal usage estimates were made in bad faith.

Id. at 50 (footnote omitted). The Board’s finding that Landis was motivated by a
“good faith” desire to keep Kobin apprised of the circumstances and actual coal
needs of the facility is supported by the record.
               Once Landis obtained information from DOC regarding the facility’s
actual requirements, on both occasions, he promptly reached out to Kobin with

demanded,” but “[a]ny minimum or maximum set by the agreement shows a clear limit on the
intended elasticity” with the “essential test” being “whether the party is acting in good faith.” 13
Pa. C.S. § 2306(a), UCC cmts. 2 & 3.
                                                22
updates on SCI-CH’s actual coal needs. On October 5, 2012, Landis received
information from the Chief Engineer for DOC, Klinikowski, that SCI-CH “cannot
burn coal since there is damage to [its B]oilers.” Kobin and Hazleton Shaft’s Ex. 8.
On the same day, Landis replied to Klinikowski:

             The coal bid estimate for Camp Hill is 13,600 tons and the
             supplier has put up money to hold this tonnage. If we are
             not burning coal or a reduced amount then I need to inform
             the supplier. So what should I tell the supplier? Based on
             your e-mail it appears we will not be taking any coal at
             least through December, 2012. Per the facility estimates
             this amount is 5,700 tons. The supplier has dollars at risk
             if we take no coal so we need to provide them [sic] a
             reduced estimated [sic]. So should I tell Kobin Coal the
             awarded supplier we are not taking any coal f[or] Camp
             Hill through December and will provide them [sic] an
             update on the remaining usage before the end of the year?
             What are your thoughts?

Id. (emphasis added). On October 22, 2012, Landis followed up with Klinikowski
and Gouse, and others, asking if “we have an update on the coal situation at Camp
Hill?” Id. Gouse responded, asking Landis to notify Kobin that “we won’t be taking
any coal through December at a minimum.” Id. Landis replied, “Thanks I will
inform Kobin . . . you will not be taking coal through December, 2012. If your
situation changes please let us know.” Id. On the same day, Landis notified Kobin
of the status. Id.
             As a follow up to Landis’s request, on November 21, 2012, Gouse
emailed Landis with an update: DOC did not anticipate any coal deliveries to SCI-
CH “until at least February.” Kobin and Hazleton Shaft’s Ex. 12. Five days later,
Landis emailed Kobin advising it of the same, but mistakenly attached a revised
estimate sheet that contained the mathematical error changing the annual estimate to
                                         23
9,500 tons. Kobin and Hazleton Shaft’s Ex. 13. Though the revised estimate sheet
contained a mistake, these communications support the Board’s determination that
Landis attempted to keep Kobin informed of the facility’s actual needs as required
by the contract. Therefore, the Board’s conclusion that Kobin and Hazleton Shaft
did not produce evidence to show that DGS and DOC breached the duty imposed by
Section 2306(a) of the Pennsylvania UCC is supported by the record.

             C. Doctrine of Necessary Implication

             Kobin and Hazleton Shaft next assert that the Board erred when it did
not consider or apply the doctrine of necessary implication to this case. Kobin and
Hazleton Shaft’s Brief at 33-34. DSG and DOC counter that the Board was correct
to ignore this argument because the doctrine rarely applies. DGS and DOC’s Brief
at 22-23. The doctrine provides:

             [i]n the absence of an express provision, the law will
             imply an agreement by the parties to a contract to do and
             perform those things that according to reason and justice
             they should do in order to carry out the purpose of the
             contract and to refrain from doing anything that would
             destroy or injure the other party’s right to receive the
             fruits of the contract. . . . The doctrine of necessary
             implication may be applied only in limited
             circumstances to prevent injustice where it is abundantly
             clear that the parties intended to be bound by the terms
             sought to be implied.

Agrecycle, Inc., 783 A.2d at 868 (emphasis added) (refusing to apply the doctrine
because it would defeat the express bargained for terms of the contract).
             Kobin and Hazleton Shaft claim that a term must be implied into the
contract to require DGS and DOC to purchase a minimum amount of coal. Kobin
and Hazleton Shaft’s Brief at 34. Kobin and Hazleton Shaft further assert that a term

                                         24
must be implied to require that DGS “periodically update [Kobin] regarding the
tonnage estimates at SCI Camp Hill as well as inform [Kobin] of any and all relevant
factors which might materially affect tonnage estimates.” Id. at 36. What Kobin
and Hazleton Shaft are seeking, however, is to imply provisions into the contract
that are not actually there to support their position. The doctrine of necessity only
applies in cases where it is clear that such a missing provision was the intention of
both parties.
                For example, in Slater v. Pearle Vision Center, Inc. 546 A.2d 676, 679-
80 (Pa. Super. 1988), the Superior Court addressed this issue. In Slater, the Superior
Court had before it a commercial lease dispute in which the tenant, Pearle, never
occupied the premises that it leased from the shopping center. Id. at 677. The
shopping center had concerns that the presence of a vacant store could damage the
business of the mall and filed a complaint in equity seeking an injunction to require
Pearle to occupy the premises. Id. Applying the doctrine of necessary implication,
the Court stated that though the lease did not expressly provide a provision requiring
the tenant to occupy the premises, several paragraphs in the lease had language from
which the Court could imply that requirement. Id. at 679-80. The Court cited a
subparagraph in the lease that provided that the tenant agrees to “open the Premises
for business to the public not later than . . . 90 days after Landlord’s approval of
Tenant’s plans and specifications.” Id. at 680. The Court reviewed other similar
provisions of the lease, including a provision that limited the amount of time that the
premises could be vacant, to conclude that the shopping center pleaded a minimal
claim based on an “implied obligation to occupy and use.” Id. at 681.
                But, in cases where the contract does not have language to suggest the
parties’ intentions, our courts have declined to apply the doctrine to reach a result

                                           25
contrary to the express terms of the contract. See Agrecycle, Inc., 783 A.2d at 868-
69 (rejecting application of the doctrine, explaining that applying it would “defeat
the express, bargained-for terms of the agreement, in which the City did not
guarantee or warrant the quantity and quality of the compostable materials to be
delivered to Agrecycle”); Kaplan v. Cablevision of Pa., Inc., 671 A.2d 716, 720 (Pa.
Super. 1996) (rejecting application of the doctrine because “[w]e may not imply the
contractual duty to provide continuous uninterrupted service or unrequested credits
for outages when it is unclear whether the cable companies clearly intended to be
bound by this obligation” as the obligation is not expressly stated nor is there any
provision to suggest that the cable companies obligated themselves).
             Here, Kobin and Hazleton Shaft overlook the express provisions of the
contract that required DGS and DOC to purchase only their actual coal requirements,
namely, that it:

             shall be understood and agreed that any quantities listed
             in the [c]ontract are estimated only and may be increased
             or decreased in accordance with the actual requirements
             of the Commonwealth and that the Commonwealth in
             accepting any bid or portion thereof, contracts only and
             agrees to purchase only the materials and services in such
             quantities as represent the actual requirements of the
             Commonwealth.

R.R. 54 (emphasis added). As such, there is not an absence of a provision that would
give rise to the applicability of the doctrine of necessary implication. See Slater,
546 A.2d at 680. Rather, the express provisions making the contract a requirements
contract are present in the contract and no additional provision need be implied.
While the Board did note in its analysis that the implied duty of good faith cannot
be used to change a contract term, the Board did not specifically address Kobin and
Hazleton Shaft’s claim that the doctrine of necessary implication was applicable.
                                        26
However, this Court finds that the Board’s omission was not error because the
doctrine, as noted above, is inapplicable to the case sub judice.

             III. Notice and Duty to Mitigate Damages

             Finally, Kobin and Hazleton Shaft contend that the Board erred by
considering the verbal statements made on January 22, 2013 to a Kobin
representative to be effective “notice” under the contract that no more coal would be
shipped and by determining that the statements triggered an obligation for Hazleton
Shaft to mitigate its damages. Kobin and Hazleton Shaft’s Brief at 37. In support,
Kobin and Hazleton Shaft rely on Paragraph 43 of the contract, asserting that it
required the notice to be in writing and signed by all the parties to be valid and
binding. Id. Paragraph 43 provides, in part:

             This [c]ontract, including the [i]nvitation for [b]ids, the
             [c]ontractor’s bid, all referenced documents, and any
             [p]urchase [o]rder constitutes the entire agreement
             between the parties. No agent, representative, employee
             or officer of either the Commonwealth or the contractor
             has the authority to make, or has made, any statement,
             agreement or representation, oral or written, in connection
             with the [c]ontract, which in any way can be deemed to
             modify, add to or detract from, or otherwise change or
             alter its terms and conditions.

V.43 CONTRACT-034.1b Integration (Nov. 30, 2006); R.R. 72. Though Kobin and
Hazleton Shaft assert that this provision requires “notice,” the plain language of the
provision does not use the term notice.        Rather, the language explains what
documents are considered part of the contract and that no agent, representative,

                                          27
employee or officer of the Commonwealth may modify or alter the terms of the
agreement.
             Here, the record shows that the January 22, 2013 meeting had been
scheduled because Kobin, through Nester, wanted to find out why “we weren’t
shipping coal to Camp Hill.” 10/3/17, N.T. 67. At the January 22, 2013 meeting, a
representative of DOC indicated to Nester that DOC did not anticipate ordering any
more coal during the contract year. R.R. 256-57. Shortly after the meeting, Nester
informed Roskos of Hazleton Shaft that a DOC representative told him that SCI-CH
would not be ordering any more coal for the contract period. R.R. 256-57.
             Through this statement, the Commonwealth was not modifying or
changing the terms of the contract. As stated previously, Kobin and Hazleton Shaft
were retained to provide coal for the Commonwealth’s actual needs. R.R. 54. The
statements informed Hazleton Shaft that SCI-CH did not anticipate ordering
additional coal during the contract period. The Board did not err by considering
those statements as “notice” to Kobin and Hazleton Shaft that the Commonwealth
did not intend to order additional coal. Because Kobin and Hazleton Shaft knew by
January 22, 2013 that DOC was not going to order additional coal for the contract
period, the Board properly concluded that Kobin and Hazleton Shaft should have
immediately taken steps to sell the coal that they had been holding for this contract
to mitigate their damages.
             “As a general proposition of contract law, a party who suffers a loss due
to a breach of contract has a duty to make a reasonable effort to mitigate his losses.”
Bafile v. Borough of Muncy, 588 A.2d 462, 464 (Pa. 1991). Once a party “has reason
to know that performance by the other party will not be forthcoming,” a party is
expected to take such affirmative steps as are appropriate in the circumstances to

                                          28
avoid loss by making substitute arrangements or otherwise. Restatement (Second)
of Contracts § 350 (Am. Law. Inst. 1981), cmt. b. The duty to mitigate damages is
not onerous and does not require success but simply to make an “honest good-faith
effort.” Vladimirsky v. Sch. Dist. of Phila., 144 A.3d 986, 1004 (Pa. Cmwlth. 2016).
             The evidence indicates that Hazleton Shaft did not sell the Barley
tonnage that had been set aside for shipments to SCI-CH until the beginning of 2014,
approximately a year after DOC provided notice. R.R. 230. Hazleton Shaft, through
Roskos, explained that the “bottom dropped out of the coal market” in the spring of
2013 (the April, May, June period). R.R. 230-31. Roskos further explained, “[t]here
was another supplier that supplied coal to the state. I believe it was $90-some a ton.
And we just couldn’t compete at that.          That was actually below my cost of
production.” R.R. at 230.
             We agree with the Board that upon receiving notice in January 2013,
neither Kobin nor Hazleton Shaft made an “honest good-faith effort” to avoid loss,
i.e., by trying to immediately sell the coal that Hazleton Shaft allegedly held for SCI-
CH. Even if Kobin and Hazleton Shaft presented evidence to support a breach of
the contract, their claims against DGS and DOC cannot stand as they failed to
produce any evidence showing that they made timely efforts to mitigate their
damages from January 2013 to the Spring of that year when the “bottom dropped
out of the coal market.” Therefore, the Board properly found that neither Kobin nor
Hazleton Shaft made timely efforts to mitigate their damages from the end of January
2013 until the spring when the market “collapsed.” F.F. 113.

             IV. Conclusion

             The Board did not err by concluding that Kobin and Hazleton Shaft
failed to show that DGS and DOC made a material misrepresentation relating to the
                                          29
original 13,600-ton coal estimate to support their claim for constructive fraud.
Though the estimate of coal usage turned out to be incorrect, Kobin and Hazleton
Shaft did not produce any evidence showing that DGS and DOC’s estimate was an
actual misrepresentation or a misrepresentation through gross mistake or arbitrary
action.
             The evidence produced by DGS and DOC, and accepted by the Board,
demonstrated that DOC attempted to keep the coal burning Boilers operating as long
as possible through the contract period. When DOC ascertained that the Boilers
could no longer be used, in the Fall of 2012, this information was communicated to
DGS which timely notified Kobin. While the Board found that DGS, through the
November 2012 email, provided a revised estimate of coal usage of 9,500 tons which
amounted to a misrepresentation, the Board did not err when it concluded that Kobin
and Hazleton Shaft failed to produce evidence showing that they suffered financial
hardship due to their reliance on this, or any, alleged misrepresentation.
             The Board also did not err when it concluded that Kobin and Hazleton
Shaft did not meet their burden of showing that DGS and DOC breached their duties
of good faith under Section 205 of the Restatement (Second) of Contracts or under
Section 2306 of the UCC. The contract here required DGS and DOC to purchase
the coal actually needed; nothing more. Kobin and Hazleton Shaft produced no
evidence showing that DGS and DOC’s coal usage estimates were made in bad faith
or that they did not perform under the terms of the contract. Though Kobin and
Hazleton Shaft assert before this Court that the Board erred by failing to apply the
doctrine of necessary implication to require DOC to purchase 9,500 tons of coal
provided in the revised estimate, the Board did not err by declining to address this
argument. To provide Kobin and Hazleton Shaft with their requested relief would

                                         30
require the Board, and this Court, to ignore the express terms of the contract agreed
to by the parties, which neither the Board nor we may do.
             Finally, the Board did not err when it concluded that Kobin and
Hazleton Shaft failed to mitigate their damages once DOC notified them in January
2013 that DOC would not be ordering any additional coal for the contract period.
Hazleton Shaft did not produce any evidence showing that it made an “honest good-
faith effort” to sell the coal that it had stockpiled until a year later and, therefore,
their claim for breach of contract cannot stand.
             Accordingly, we affirm.

                                        __________________________________
                                        CHRISTINE FIZZANO CANNON, Judge

                                          31
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Kobin Coal Corporation and            :
Hazleton Shaft Corporation,           :
                  Petitioners         :
                                      :
            v.                        :
                                      :
Department of General Services        :
and Department of Corrections,        :   No. 600 C.D. 2018
                  Respondents         :

                                 ORDER

            AND NOW, this 7th day of January, 2019, the April 2, 2018 order of
the Board of Claims is hereby AFFIRMED.

                                   __________________________________
                                   CHRISTINE FIZZANO CANNON, Judge