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WILSON v. SEPTA

March 30, 1989

FRANK J. WILSON
v.
SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, et al.



The opinion of the court was delivered by: LORD, III

 Plaintiff, a former Southeastern Pennsylvania Transportation Authority ("SEPTA") employee, brought this action against SEPTA and Lewis Gould, the chairman of SEPTA's board, to recover severance pay and salary assertedly due to plaintiff under an alleged employment contract.

 In late 1987, plaintiff was SEPTA's Assistant General Manager for Operations, and his salary was $ 85,000 per year. At that time, the SEPTA board was looking for a new General Manager. The board considered hiring plaintiff for this position, but passed him over in favor of William Stead. Plaintiff then considered leaving SEPTA, and was looking for other jobs. However, on November 16, 1987, Stead (as the new General Manager) and Gould (as Chairman of the Board) signed a letter to plaintiff which provided that, in consideration for remaining at SEPTA, plaintiff would become Deputy General Manager for Operations (a newly created position), and receive a salary of $ 110,000 per year plus various fringe benefits, effective November 30, 1987. The alleged contract also provided that if plaintiff were fired for any reason, or if he resigned because he was asked to take a position with a lower salary or less responsibility, he was to receive a year's severance pay. Plaintiff avers that, in reliance on this letter, he stopped looking for other jobs.

 Two weeks later, however, on December 1, 1987, (the day after the alleged contract was to become effective) Stead told plaintiff that SEPTA would not abide by the alleged contract and that instead, he wanted plaintiff to take the position of Assistant Deputy General Manager for Strategic Planning, a different position with less responsibility, at a salary of $ 100,000 per year.

 Plaintiff rejected this suggestion and resigned from SEPTA a few weeks later. His resignation became effective on February 10, 1988. Plaintiff never assumed his new duties, nor was his salary ever increased from $ 85,000 per year. He received no severance pay.

 In this action, plaintiff claims that he resigned as the result of a demotion, and seeks $ 110,000 in severance pay and some $ 4200 in unpaid salary, *fn1" based on the alleged contract signed by Stead and Gould. Plaintiff and SEPTA have filed cross motions for summary judgment on plaintiff's claims against SEPTA. No motion on plaintiff's claim against the other defendant, Gould, is before me.

 SEPTA argues that the alleged contract with plaintiff is unenforceable under Pennsylvania law because (1) severance pay agreements with employees like plaintiff are not authorized by SEPTA's enabling legislation; (2) the alleged contract was not approved by board resolution; and (3) it lacks consideration. SEPTA argues further that under Pennsylvania law, as a municipal corporation, it is not bound by the doctrines of apparent authority and equitable estoppel. For the reasons that follow, I will grant SEPTA's motion for summary judgment, and deny plaintiff's.

 A. THE ALLEGED CONTRACT IS ULTRA VIRES.

 Subject matter jurisdiction in this case rests on diversity of citizenship between plaintiff and the defendants. Pennsylvania law therefore applies.

 As a municipal corporation, SEPTA has the power to do only what its enabling legislation authorizes. Kline v. Harrisburg, 362 Pa. 438, 443-44, 68 A.2d 182 (1949). Since plaintiff's suit is based on an alleged employment contract between plaintiff and SEPTA (the letter signed by Stead and Gould), the threshold question is whether that alleged contract was authorized under SEPTA's enabling legislation. For the following reasons, I conclude that it was not.

 SEPTA's enabling legislation is the Pennsylvania Urban Mass Transportation Law ("PUMTL"), 55 P.S. § 600.301 et seq. The PUMTL does not explicitly authorize the payment of "severance pay." It does, however, authorize the payment of employee compensation and benefits, subject to certain requirements.

 The PUMTL requires the chief operations officer (whom SEPTA calls the "general manager") to "appoint . . . employes . . . subject to the provisions of this article," id. § 600.325(3), and to "classify all the offices, positions and grades of regular employment required, excepting that of the chairman of the board, secretary, counsel to the board and controller, with reference to the duties thereof and the compensation fixed therefor . . . ." Id. § 600.329(a). It further provides that "no officer or employe shall be discharged or demoted except for just cause." *fn2" Id.

 The PUMTL's compensation scheme is as follows:

 
The board acting through the chief operations officer shall have the right to bargain collectively and enter into agreements with labor organizations. . . . The compensation of the chief operations officer, counsel to the board, secretary and controller shall be fixed by the board. For all other officers, employes, attorneys, engineers, consultants and agents the board shall establish salary scales. The chief operations officer shall establish within such salary scales compensation levels based upon written appraisals of performance for all employes under his control.

 Id. § 600.328 (emphasis added). The PUMTL also expressly authorizes the payment of certain employee benefits: SEPTA may enter into contracts of group insurance for the benefit of its employees, id. § 600.303(19), and it must establish and maintain a pension and retirement system. Id. § 600.329(c).

 Plaintiff was not one of the four top officers whose compensation was to be fixed directly by the board, nor was he a union member subject to a collective bargaining agreement. He was therefore one of the "other . . . employes" for whom "the board shall establish salary scales." Id. § 600.328. Stead, as chief operations officer, was to classify plaintiff's position or grade of employment, see id. § 600.329(a), and the board was to set a salary scale for that position or grade. Stead was authorized to establish plaintiff's "compensation" as long as it was within the "salary scale[]" established by the board for plaintiff's position. See id. § 600.328.

 I must therefore decide whether Stead's promise to plaintiff of a salary of $ 110,000 per year and a year's severance pay was "compensation . . . within [the] salary scale[]" ...


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