Philadelphia Workforce Development Corp. v. KRA Corp.
673 F. App'x 183
| 3rd Cir. | 2016Background
- PWDC (a nonprofit administering workforce programs) contracted with KRA (a for‑profit operator) under a 2008 hybrid contract combining cost‑reimbursement and performance‑based payments for two EARN centers and related training programs.
- KRA met performance benchmarks and invoiced for payments; a Commonwealth audit found KRA had been overpaid by about $2.2 million, primarily for inadequately documented administrative/indirect costs.
- PWDC suspended payments, performed an internal audit, disallowed roughly $1.93 million in invoices, and withheld funds; KRA continued operations for a time but ceased in Oct. 2009.
- PWDC sued to recover alleged overpayments; KRA counterclaimed for withheld payments. At trial the District Court found the contract ambiguous and admitted extrinsic evidence (including the Commonwealth audit); the jury adopted PWDC’s damage calculations and returned verdict for PWDC for $161,151.
- KRA appealed, arguing the contract was unambiguous (precluding parol evidence), that certain evidentiary rulings were erroneous, and that PWDC’s disallowance of indirect costs lacked sufficient evidentiary support.
Issues
| Issue | Plaintiff's Argument (KRA) | Defendant's Argument (PWDC) | Held |
|---|---|---|---|
| Whether the FY 2008 contract is ambiguous, permitting extrinsic/parol evidence | Contract is unambiguous: performance payments are payable upon meeting benchmarks, independent of expenditures | Contract language is susceptible to competing readings; terms like “program income” and “profit” and payment provisions can be read to require return of excess revenue | Court: Contract is ambiguous; question for the factfinder. Jury verdict for PWDC affirmed |
| Admissibility of Commonwealth audit and subcontractor summary forms | Audit is hearsay and irrelevant | Admissible under business‑records exception and relevant to damage and contemporaneous understanding of terms | Court: Admission not an abuse of discretion; documents were admissible and relevant |
| Exclusion of KRA’s reconciliation documents and PWDC President’s email | Excluding KRA documents and the email was improper and prejudicial | Documents were inadmissible hearsay; email was marginal and its exclusion harmless | Court: Exclusion of KRA’s reconciliation docs proper as hearsay; exclusion of email harmless error |
| Sufficiency of evidence supporting PWDC’s disallowance of indirect/administrative costs | KRA had a federally negotiated indirect‑cost rate allowing lumping costs as indirect; therefore disallowance unsupported | KRA failed to produce a negotiated rate or category support; PWDC’s line‑by‑line audit supported disallowances | Court: Evidence was sufficient for jury to accept PWDC’s calculation; KRA failed to substantiate indirect‑cost claim |
Key Cases Cited
- Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425 (Pa. 2004) (extrinsic evidence permitted where contract term is ambiguous)
- Pacitti v. Macy’s, 193 F.3d 766 (3d Cir. 1999) (contract ambiguity is a legal question reviewed plenarily)
- Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604 (3d Cir. 1995) (definition of contractual ambiguity)
- Bohler‑Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79 (3d Cir. 2001) (factfinder decides between competing contract interpretations using extrinsic evidence)
- McQueeney v. Wilmington Trust Co., 779 F.2d 916 (3d Cir. 1985) (nonconstitutional evidentiary errors in civil cases are reversible only if they likely affected the outcome)