Court Opinion

ID: 4454027
Source: CourtListenerOpinion
Date Created: 2019-11-07 19:10:25.252741+00
Date Added: 2024-06-11T09:24:53.637643
License: Public Domain

J-A13005-19

                                   2019 PA Super 333

    CITY OF ALLENTOWN,                         :   IN THE SUPERIOR COURT OF
                                               :        PENNSYLVANIA
                       Appellant               :
                                               :
                                               :
                v.                             :
                                               :
                                               :
    LEHIGH COUNTY AUTHORITY                    :   No. 3089 EDA 2018

              Appeal from the Order Entered September 25, 2018
     In the Court of Common Pleas of Lehigh County Civil Division at No(s):
                                2018-C-1765

BEFORE:      SHOGAN, J., NICHOLS, J., and STRASSBURGER*, J.

OPINION BY SHOGAN, J.:                              FILED NOVEMBER 07, 2019

       Appellant, the City of Allentown (“the City”), appeals from the order

entered in the Court of Common Pleas of Lehigh County on September 25,

2018, denying its motion for a preliminary injunction against Appellee, Lehigh

County Authority (“LCA”). We affirm.

       The trial court summarized the factual history of this case as follows:

              On May 1, 2013, the parties entered into the Allentown
       Water and Sewer Utility System Concession and Lease Agreement
       [(“the Agreement”)1].         The Agreement contains specific
       obligations for ensuring that LCA maintains the water and sewer
       utility systems it was leasing for a fifty-year time period. The
       Agreement also contains express provisions limiting the extent to
       which water and sewer bills sent to City residents can be increased
       by LCA. Specifically, Article 7 of the Agreement generally governs
____________________________________________

1 Relevant excerpts of the Agreement are included in the certified record. The
full agreement is available at:
https://lehighcountyauthority.org/wp-content/uploads/Allentown-Water-and-
Sewer-Concession.-Lease-Agreement-May-1-2013.pdf.
____________________________________
* Retired Senior Judge assigned to the Superior Court.
J-A13005-19

     the imposition of Service Charges on City residents, and the
     amount by which those service charges can be increased on an
     annual basis.

           Section 7.1(d) of the Agreement provides for the “Initial
     Schedule of Rates” and substantially restricted LCA from revising
     that Schedule without the prior approval of the City prior to
     January 2016. Accompanying [the Agreement] was a set of
     schedules. Schedule Three details the various service charges
     imposed as of 2016 for water and sewer service based upon the
     size of the piping serving a particular address. By and large, any
     customer with a pipe size from 5/8” to one inch is a residential
     ratepayer, while those addresses with wider pipe sizes are almost
     uniformly commercial customers.

           In addition, the Schedule listed the service charges, or
     rates, to be imposed on residential and commercial customers
     based on billing cycles. Residential customers were billed on a
     quarterly basis, while commercial customers were billed on a
     monthly cycle. This was the billing cycle pattern used by the City
     when it operated the water and sewer systems. Respondent LCA
     continued this billing cycle practice when it took over the operation
     of the systems even though the express terms of [the Agreement]
     do not compel the continuation of the quarterly billing cycle for
     residential customers.

            After the commencement of [the Agreement] in 2013, LCA
     determined that approximately 750 residential and commercial
     customers were being billed on the incorrect billing cycle, i.e.,
     some residential customers were billed monthly and some
     commercial customers were billed quarterly.           However, LCA
     notified the City it intended to correct, or “true up,” this anomaly.
     The City understood this correction occurred by 2016.

           Beginning in 2016, the Agreement permitted LCA to
     increase rates on City customers subject to specific limitations. In
     particular, Section 7.1(e) restricted LCA to increasing rates only
     once per calendar year. That subsection also provides that for
     each calendar year beginning in 2016, LCA may increase the
     Service[] Charges billed for each class or type of Utility Service,
     but any increase in service charges may not exceed the Permitted
     Annual Rate Adjustment.

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           The “Permitted Annual Rate Adjustment” is based on the
     “Schedule of Service Charges” in effect for the prior year
     multiplied by the combined sums of the “Index Change” for the
     calendar year, and a fixed rate multiplier referred to as the
     “Margin Change.” The “Index Change” generally corresponds to
     any increase in the Consumer Price Index for Urban Consumers -
     Northeast Region as compiled by the U.S. Department of Labor,
     Bureau of Labor Statistics. According to the terms of [the
     Agreement], the “Margin Change” from 2016 - 2032 is 2.5% per
     year. That rate falls to 2.0% per year from 2033 until the
     expiration of the lease agreement.

            As of November 13, 2017, LCA published its proposed rates
     for water and sewer service for both residential and commercial
     customers effective January 1, 2018. The rates were quoted in
     both monthly and quarterly billing rates for both types of
     consumers. Until 2016, LCA had not published a schedule of new
     rates listing both monthly and quarterly billed amounts for each
     class of customers. For both 2017 and 2018, the published rates
     indicated what the billed amounts would be for both residential
     and commercial customers on both a monthly and a quarterly
     billing cycle. Despite these two types of rates being included in
     the schedules published in 2017 and 2018 for implementation the
     following year, LCA continued the past practice of billing Small
     Meter Customers on a quarterly basis, and Large Meter Customers
     on a monthly rate schedule.

           [The City] does not dispute that the 2017 rate schedule fell
     within the permitted renewal rate adjustment, using the 2016
     rates as the base figure. As was testified to at the hearing on the
     motion for the preliminary injunction, the Index Change for 2016
     was 0.8% for that year, meaning the annual rate adjustment for
     2017 was only 3.3% (0.8% Index Change + 2.5% Margin
     Change). For calendar year 2018, the Index Change from 2017
     was 1.5%. When added to the fixed multiplier of 2.5%, the
     permitted annual rate adjustment as published for 2018 was
     4.0%.

           However, on May 21, 2018, the LCA board unanimously
     approved a resolution to convert from a quarterly billing schedule
     to a monthly billing schedule for Small Meter Customers, effective
     August 1, 2018. Based on the resolution approved by the LCA
     Board, the amount paid annually by residential customers as of
     August 1, 2018 would jump from $150 up to $311, an increase of

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      107%. [The City] argues this level of rate adjustment is well
      beyond the permitted annual rate change under the terms of [the
      Agreement]. Additionally, [the City] asserts that such a midyear
      rate adjustment violates the terms of Article 7.1(e).

Trial Court Opinion, 9/25/18, at 2-5 (internal citations omitted).

      The City filed a complaint on July 10, 2018, and a motion for preliminary

injunction on July 16, 2018. LCA filed an answer to the complaint on August 2,

2018, and an answer to the motion for preliminary injunction on August 6,

2018. The trial court held an evidentiary hearing on the motion for preliminary

injunction on September 4, 2018. On September 25, 2018, the trial court

issued an order and opinion denying the motion for preliminary injunction.

The City filed a notice of appeal on October 24, 2018. The City and the trial

court complied with Pa.R.A.P. 1925.

      The City presents the following issues for our review on appeal:

      1.    Whether the [t]rial [c]ourt committed reversible error in
      concluding that the City of Allentown, which was a party to the
      contract, did not have standing to bring the lawsuit against Lehigh
      County Authority (“LCA”) for breach of contract.

      2.    Whether the [t]rial [c]ourt committed reversible error in
      concluding that implementation of monthly billing would not
      immediately and irreparably harm the City and its residents.

      3.    Whether the [t]rial [c]ourt committed reversible error in
      concluding that the City did not provide evidence that a greater
      injury would be suffered by the City if injunctive relief was denied.

      4.    Whether the [t]rial [c]ourt committed reversible error in
      concluding that the City has not demonstrated that granting
      injunctive relief would serve the public interest.

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      5.    Whether the [t]rial [c]ourt committed reversible error in
      concluding that any claim by the City would be premature until
      the rate increase goes into effect.

Appellant’s Brief at 2-3.

      The standard of review applied when reviewing a decision to grant or

deny a preliminary injunction is as follows:

      We recognize that on an appeal from the grant or denial of a
      preliminary injunction, we do not inquire into the merits of the
      controversy, but only examine the record to determine if there
      were any apparently reasonable grounds for the action of the
      court below. Only if it is plain that no grounds exist to support
      the decree or that the rule of law relied upon was palpably
      erroneous or misapplied will we interfere with the decision of the
      trial court.

Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828

A.2d 995, 1000 (Pa. 2003).

      “The purpose of a preliminary injunction is to preserve the status quo

as it exists or previously existed before the acts complained of, thereby

preventing irreparable injury or gross injustice.” Santoro v. Morse, 781 A.2d

1220, 1229 (Pa. Super. 2001) (emphasis omitted). A petitioner seeking a

preliminary injunction must establish every one of the following prerequisites:

      First, a party seeking a preliminary injunction must show that an
      injunction is necessary to prevent immediate and irreparable harm
      that cannot be adequately compensated by damages. Second,
      the party must show that greater injury would result from refusing
      an injunction than from granting it, and, concomitantly, that
      issuance of an injunction will not substantially harm other
      interested parties in the proceedings. Third, the party must show
      that a preliminary injunction will properly restore the parties to
      their status as it existed immediately prior to the alleged wrongful
      conduct. Fourth, the party seeking an injunction must show that
      the activity it seeks to restrain is actionable, that its right to relief

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      is clear, and that the wrong is manifest, or, in other words, must
      show that it is likely to prevail on the merits. Fifth, the party must
      show that the injunction it seeks is reasonably suited to abate the
      offending activity.      Sixth, and finally, the party seeking an
      injunction must show that a preliminary injunction will not
      adversely affect the public interest.

The York Group, Inc. v. Yorktowne Caskets, Inc., 924 A.2d 1234, 1241

(Pa. Super. 2007) (quoting Summit Towne Centre, 828 A.2d at 1001).

      In its first issue, the City argues that the trial court erred in concluding

that it lacked standing to bring the lawsuit against LCA for breach of contract.

Appellant’s Brief at 19. The City asserts that “[i]t is black letter law that direct

parties to a contract have a right to sue under the contract.” Id. The City

maintains that the cases relied upon by the trial court are inapposite and

distinguishes those cases from the factual scenario in this case. Id. at 21-24.

Specifically, the City explains that in those cited cases, the parties bringing

suit were not parties to the contract at issue, nor did they have a direct,

substantial interest in the matter, and therefore had no standing to sue. Id.

at 23-24. In contrast, the City posits in the case sub judice, “[T]he City of

Allentown is a party to and signatory to the Agreement in dispute, and it has

been directly harmed by LCA’s actions.” Id. at 24. Accordingly, it is the City’s

position that it has standing to sue LCA in this matter. Id. at 24.

      In addressing the standing issue, the trial court provided the following

analysis:

      [I]f the proposed rate increase were to go into effect as LCA has
      suggested, it would be the residential customers, not the City,
      who would suffer a harm from the alleged breach of the provision

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     to cap possible annual rate increases. In order to have standing
     to pursue a lawsuit, a party must show a substantial, direct and
     immediate interest in the subject of the litigation.            The
     requirement of a “substantial interest” means there must be some
     discernible adverse effect to some interest of the party other than
     the abstract interest a municipality maintains on behalf of all its
     citizens. See Wm. Penn Parking Garage, Inc. v. City of Pittsburgh,
     464 Pa. 168, 346 A.2d 269 (1975). “[W]here it cannot in any
     sense be regarded as a representative of the public or its
     inhabitants or citizens, it has been held that such a (municipal)
     corporation may not maintain an action to protect the rights of its
     resident taxpayers where the litigation does not affect such a
     corporation directly.” City of Hazleton v. Hazleton Area School
     District, 276 A.2d 545, 547 (Pa. 1971).

           Our appellate courts have concluded that a municipality
     does not stand in the position of its residents or taxpayers when
     attempting to pursue litigation in which the municipality cannot
     allege a direct harm. Borough of Valley-Hi Incorporation Case,
     381 A.2d 204 (Pa. Cmwlth. 1977); Upper Moreland Twp. v.
     Pennsylvania Dept. of Transportation, 409 A.2d 118 (Pa. Cmwlth.
     1979). The Court found that Appellant was unable to demonstrate
     how the City, rather than the citizens, will suffer any direct harm
     from LCA’s proposed change in its billing cycles.

Trial Court Opinion, 12/13/18, at 9-10.

     Parties to a contract can move to enforce the contract when there is a

breach by another party.    Liss & Marion, P.C. v. Recordex Acquisition

Corp., 983 A.2d 652, 659-661 (Pa. 2009). “A cause of action for breach of

contract must be established by pleading (1) the existence of a contract,

including its essential terms; (2) a breach of a duty imposed by the contract;

and (3) resultant damages.” Reformed Church of Ascension v. Theodore

Hooven & Sons, Inc., 764 A.2d 1106, 1109 (Pa. Super. 2000). Furthermore,

our Supreme Court has explained:

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            Where one party to a contract without any legal justification,
      breaches the contract, the other party is entitled to recover,
      unless the contract provided otherwise, whatever damages he
      suffered, provided (1) they were such as would naturally and
      ordinarily result from the breach, or (2) they were reasonably
      foreseeable and within the contemplation of the parties at the time
      they made the contract, and (3) they can be proved with
      reasonable certainty.

Ferrer v. Trustees of University of Pennsylvania, 825 A.2d 591, 610 (Pa.

2002) (citation omitted).     Moreover, a party to the contract can seek a

preliminary injunction in an effort to enjoin a breach of contract. Allegheny

Anesthesiology Associates, Inc. v. Allegheny General Hosp., 826 A.2d

886, 891-893 (Pa. Super. 2003); see also Santoro, 781 A.2d at 1228

(“Pennsylvania courts sitting in equity have jurisdiction to prevent the

continuance of acts prejudicial to the interest of individual rights, including the

authority to enjoin wrongful breaches of contract where money damages are

an inadequate remedy.”).

      In the case sub judice, the Agreement provides, inter alia, as follows:

      This ALLENTOWN WATER AND SEWER UTILTIY SYSTEM
      CONCESSION AND LEASE AGREEMENT (this “Agreement”) is
      made and entered into as of this 1st day of May, 2013 by and
      between the City of Allentown, a municipality and a city of the
      third class of the Commonwealth of Pennsylvania duly organized
      and existing under the Constitution and laws of said
      Commonwealth and the City of Allentown Home Rule Charter (the
      “City”), and Lehigh County Authority, a municipal authority duly
      organized and existing under the Constitution and laws of said
      Commonwealth (the “Concessionaire”).

The Agreement, 5/1/13, at 1.           Furthermore, the “RECITALS” of the

Agreement, provide in relevant part:

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     WHEREAS, the City owns and operates the Allentown Sewer Utility
     System constituting the assets herein defined as the “Sewer Utility
     System;” and

     WHEREAS, the City owns and operates the Allentown Water Utility
     System constituting the assets herein defined as the “Water Plant
     and Distribution System” and the “Retained Water Supply
     System”; and

     WHEREAS, the Concessionaire desires to lease the Sewer Utility
     System and the Water Plant and Distribution System from the City
     and to obtain a grant from the City of the right to provide Utility
     Services (as defined herein) in connection therewith, all as
     hereinafter provided; and

     WHEREAS, the City desires to lease the Sewer Utility System and
     the Water Plant and Distribution System (collectively defined as
     the “System”) to the Concessionaire and grant the Concessionaire
     the right to provide Utility Services in connection therewith, all as
     hereinafter provided; and

                                    * * *

     WHEREAS, the City is authorized by the City of Allentown Home
     Rule Charter to enter into this Agreement providing for the lease
     of the System, and the grant to the Concessionaire the right to
     operate the System in order to provide Utility Services, subject to
     the terms hereof; and

                                    * * *

     WHEREAS, the City will retain and continue to own, maintain and
     operate the Retained Water Supply System and the City has
     agreed to provide Raw Water (as herein defined) to the
     Concessionaire from the Retained Water Supply System; and

The Agreement, 5/1/13, at 1.

     As the above-referenced language of the Agreement makes clear, the

City is a party to the Agreement. The Agreement states that the City owns

the System and will continue to own the System, and that LCA is leasing the

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System to provide utility services. As an explicit party to the Agreement, the

City has the authority to enforce the provisions of the Agreement. Liss &

Marion, P.C., 983 A.2d at 659-661.                 Furthermore, as a party to the

Agreement, the City has the ability to seek a preliminary injunction in an effort

to enforce the provisions of the Agreement. Santoro, 781 A.2d at 1228.

       Indeed, the Agreement itself addresses any legal action between the

parties as related to the Agreement. Section 16.1(a)(i-x) of the Agreement

identifies potential defaults by LCA.          The Agreement, 5/1/13, at 110-112.

Section 16.1(b)(i-ix) provides remedies for the City upon LCA’s default and

allows the City to seek specific performance, injunction, or other equitable

remedies. Id. at 112-113. Moreover, Section 16.1(b)(x) provides that upon

LCA’s default, “the City may exercise any of its other rights and remedies

provided for hereunder or at law or equity.” Id. at 113.

       Additionally, Article 19 of the Agreement provides for dispute resolution

between the Parties,2 including informal dispute resolution procedures,

mediation, and arbitration. The Agreement, 5/1/13, at 131-136. Specifically,

Section 19.1 provides: “Scope. Any dispute arising out of, relating to, or in

connection with this Agreement, including any question as to whether such

dispute is subject to arbitration, shall be resolved as set forth in this Article

____________________________________________

2 The Agreement defines “Party” and “Parties” as follows: “‘Party’ means a
party to this Agreement and ‘Parties’ means both of them.” The Agreement,
5/1/13, 21.

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19.” Id. at 131.

       Furthermore, Section 20.12 provides, in relevant part:

       Except as expressly provided herein to the contrary (including
       with respect to such rights as are expressly granted to each
       Leasehold Mortgagee pursuant to this Agreement), no term or
       provision hereof shall be construed in any way to grant, convey or
       create any rights or interests to any Person not a party to this
       Agreement.

The Agreement, 5/1/13, at 138-139.

       Accordingly, we are constrained to disagree with the trial court’s

conclusion that the City lacked standing to seek legal redress for breach of

contract.3 However, for reasons discussed below, we cannot agree that it is

entitled to relief on its request for a preliminary injunction.

       The City’s remaining four claims on appeal relate to its argument that

entry of a preliminary injunction to enjoin LCA’s actions is appropriate. In

arguing that the trial court erred in failing to issue the preliminary injunction,

the City first argues that the trial court incorrectly concluded that

implementation of the monthly billing scenario would not immediately and

irreparably harm the City and its residents.       Appellant’s Brief at 2.   More

specifically, the City argues:

       The evidence admitted at the preliminary injunction hearing
       concretely established that, given the high poverty rate in the
____________________________________________

3  As asserted by the City, the cases relied upon by the trial court in support
of its conclusion that the City does not have standing to bring legal action
against LCA are distinguishable from the case sub judice because in those
cited cases, the party seeking legal action was not a party to a disputed
agreement.

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      City, (a) the proposed rate increase would create an economic
      hardship, causing some customers to have difficulty paying their
      water and sewer bills and (b) would further exacerbate the City’s
      blight problems, and that neither of these issues could be
      remedied fully with monetary compensation.

Id. at 27.

      In addressing this prerequisite, this Court has explained:

      [A] plaintiff seeking a preliminary injunction must show that an
      injunction is necessary to prevent immediate and irreparable harm
      that cannot be compensated adequately by money damages. In
      order to meet this burden, a plaintiff must present “concrete
      evidence” demonstrating “actual proof of irreparable harm.” The
      plaintiff’s claimed “irreparable harm” cannot be based solely on
      speculation and hypothesis.        Moreover, for purposes of a
      preliminary injunction the claimed harm must be irreversible
      before it will be deemed irreparable.

Greenmor, Inc. v. Burchick Const. Co., Inc., 908 A.2d 310, 314 (Pa.

Super. 2006) (internal citations omitted).

      In its analysis addressing this prerequisite, the trial court provided the

following explanation:

      Contrary to Appellant’s assertion, the [c]ourt’s holding with
      respect to this element for a preliminary injunction was premised
      upon the finding that Appellant failed to offer sufficient proof of
      the existence of immediate and irreparable harm that cannot
      adequately be compensated by damages.

             Immediate and irreparable harm is injury for which
      damages can only be estimated by conjecture and not by an
      accurate pecuniary standard or cannot be adequately
      compensated by an award of monetary damages. See Boehm v.
      University of Pennsylvania School of Veterinary Medicine, 573
      A.2d 575 (Pa. Super. 1990). “In order to meet this burden, a
      plaintiff must present ‘concrete evidence’ demonstrating ‘actual
      proof of irreparable harm.’” Kessler v. Brooks, 851 A.2d 994, 951
      (Pa. Super. 2004) (citation omitted).

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            Appellant failed to satisfy this element for a preliminary
      injunction to issue for two reasons. First, its failure to present any
      testimony or offer any exhibits showing that the rate increase
      would cause residents to move outside of the [C]ity militated
      against a finding of immediate and irreparable harm. To the
      contrary, any harm alleged by the City was speculative.

             Additionally, the [c]ourt did not receive any evidence that
      implementation of the monthly billing would immediately and
      irreparably harm any of the customers who would be affected in a
      manner that could not be remedied by monetary damages. As
      stated above, the billing cycle conversion was put on hold until
      resolution of the litigation. Additionally, Liesel Gross, the chief
      executive officer of LCA, testified that LCA would coordinate with
      the City to provide a reimbursement program to those customers
      if a court or arbitration panel determined that the change in the
      quarterly-to-monthly billing cycle was improper. Gross also
      testified that refunds could be sent via mailed check or that credits
      could be applied towards customers’ next bill if necessary.

            Given that any harm suffered by the City and/or its residents
      is compensable by monetary damages, and that the City’s
      contention on the impact of the rate changes is only speculative
      at this time, the [c]ourt properly found the City has failed to
      demonstrate that Appellant would suffer immediate irreparable
      harm if the preliminary injunction [was] not granted.

Trial Court Opinion, 12/13/18, at 13-14 (emphasis in original).

      We agree with the trial court’s determination. LCA has failed to present

“concrete evidence” demonstrating “actual proof of irreparable harm.”

Greenmor, Inc., 908 A.2d at 314. Furthermore, the claimed harm is not

irreversible and can be compensated adequately by monetary damages. Id.

Thus, the City has failed to meet the “irreparable and immediate harm”

prerequisite to issuance of a preliminary injunction. Accordingly, there were

“apparently reasonable grounds” for the trial court’s decision, and as such, we

are compelled to affirm its decision. Summit Towne Centre, Inc., 828 A.2d

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at 1001. Furthermore, because the City has failed to establish one of the

prerequisites, this Court need not address the others.4 Id.

       Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/7/19

____________________________________________

4  Because Appellant’s remaining issues relate to the other prerequisites
necessary for issuance of a preliminary injunction and we have concluded that
there were “apparently reasonable grounds” for the trial court’s determination
that one of those prerequisites was not met, we need not address the
remaining prerequisites, Summit Towne Centre, Inc., 828 A.2d at 1001,
nor the City’s remaining issues raising those prerequisites.

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