A. Scott Enterprises v. City of Allentown, Aplt.
142 A.3d 779
Pa.2016Background
- The City of Allentown contracted with A. Scott Enterprises (ASE) to build a public road; contaminated soil was discovered, work was suspended, and ASE declined to resume absent additional compensation.
- ASE sued for breach of contract, quantum meruit/unjust enrichment, and sought damages plus a statutory penalty and attorney fees under the Procurement Code’s prompt-payment provision (62 Pa.C.S. § 3935) after a jury found the City breached and withheld payments in bad faith.
- Section 3935 authorizes (uses “may”) a court, Board of Claims, or arbitrator to award a 1%/month penalty on amounts withheld in bad faith and attorney fees when bad faith is found; CASPA (private counterpart) uses mandatory “shall.”
- The trial court found sufficient evidence of bad faith to submit to the jury but denied ASE’s post-trial request for a statutory penalty and fees (offering only a terse explanation referencing conflicting damages testimony).
- The Commonwealth Court held a jury’s finding of bad faith requires imposition of the §3935 penalty and fees and remanded for calculation; the Pennsylvania Supreme Court granted review limited to whether a jury finding of bad faith mandates the §3935 award.
- The Pennsylvania Supreme Court reversed the Commonwealth Court: §3935’s use of “may” is permissive, not mandatory; the decision to award penalty and fees is discretionary and reviewable for abuse of discretion; remanded for the trial court to reconsider and to award interest per prior rulings.
Issues
| Issue | Plaintiff's Argument (ASE) | Defendant's Argument (City) | Held |
|---|---|---|---|
| Whether a jury finding of bad faith requires a mandatory §3935 penalty and attorney-fee award | Jury finding of bad faith should automatically trigger statutory penalty and fees; otherwise bad-faith finding is meaningless | §3935’s text is permissive (“may”); award is discretionary and reserved to court/Board/arbitrator, not dictated by a jury | The statute is permissive; awards are discretionary with the tribunal and not mandatory upon a bad-faith finding |
| If discretionary, whether the trial court abused its discretion by denying §3935 relief after the jury found bad faith | At minimum, denial was an abuse; a jury finding should create strong presumption of entitlement and the court must explain reasons; remand for application of standards/factors | Trial court did not abuse discretion; ASE’s damage proofs were inconsistent justifying denial | Court remanded for the trial court to reconsider award because the trial court’s brief explanation was insufficient; discretionary denials are reviewable for abuse of discretion |
Key Cases Cited
- A. Scott Enterprises, Inc. v. City of Allentown, 102 A.3d 1060 (Pa. Cmwlth. 2014) (Commonwealth Court’s decision holding a jury bad-faith finding mandates §3935 awards)
- Hotel Casey Co. v. Ross, 23 A.2d 737 (Pa. 1942) (permissive statutory language may be read as mandatory where justice or statute’s purpose requires)
- Treaster v. Union Twp., 242 A.2d 252 (Pa. 1968) (general rule that “may” is permissive unless ends of justice dictate otherwise)
- In re Farnese, 17 A.3d 357 (Pa. 2011) (statutory awards phrased as "as it shall deem just" permit judicial discretion)
- Pietrini Corp. v. Agate Const. Co., 901 A.2d 1050 (Pa. Super. 2006) (intermediate appellate remand for §3935 assessment after finding vexatious conduct)
- A.G. Cullen Constr. Inc. v. State Sys. of Higher Educ., 898 A.2d 1145 (Pa. Cmwlth. 2006) (discussion of §3935 and remand for fee award following finding of vexatious conduct)
- Dep’t of Gen. Servs. v. Pittsburgh Bldg. Co., 920 A.2d 973 (Pa. Cmwlth. 2007) (Board of Claims denial of §3935 relief reviewed; remanded for proper determination)
- Clipper Pipe & Service Inc. v. Ohio Cas. Ins. Co., 115 A.3d 1278 (Pa. 2015) (distinguishes CASPA applicability to private projects and highlights different statutory schemes)