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Department of Health v. Data-Quest

April 14, 2009


The opinion of the court was delivered by: Judge Smith-ribner

Argued: December 10, 2008



The Court granted the Department of Health (DOH) permission to file this interlocutory appeal of the order of the Board of Claims (Board) overruling DOH's preliminary objections to the statement of claim filed by Data-Quest, Inc. for damages under promissory estoppel and quasi-contract theories for services performed in regard to its development of a software system. The issue is whether the Board has subject matter jurisdiction over quasi-contract claims against the Commonwealth that are not based on a written agreement under Section 1724(a)(1) of the Commonwealth Procurement Code, 62 Pa. C.S. §1724(a)(1), which was added by Section 12.2 of the Act of December 3, 2002, P.L. 1147 (2002 Act).*fn2

According to Data-Quest, in 2003 DOH's Bureau of Drug and Alcohol Programs (Bureau) solicited Data-Quest and two other software vendors to develop a software system to replace its data collection or "client information system." DOH personnel with apparent authority selected Data-Quest's software named ClientSuite and communicated DOH's intention to purchase that system. Until 2007 Data-Quest worked closely with DOH and the Bureau to customize ClientSuite, meeting with DOH personnel dozens of times to design and create an implementation plan. At DOH's request Data-Quest participated in a federal technical assistance review to implement national outcome measures, further indicating DOH's intention to use ClientSuite. Data-Quest devoted most of its time since 2003 to developing ClientSuite. In 2006 DOH reassured Data-Quest that it intended to purchase ClientSuite and met with Data-Quest numerous times during the year, but in 2007 DOH stated that it would not acquire ClientSuite. Data-Quest demanded payment for the costs of its services between 2003 and 2006, but DOH refused, which resulted in Data-Quest filing its claims on November 6, 2007.

DOH alleged in preliminary objections that the Board lacked subject matter jurisdiction over Data-Quest's claims because it has not averred a written agreement with DOH and that the Procurement Code limits Board jurisdiction to claims arising out of a written agreement with the Commonwealth. DOH argued that the 2002 Act moved the Board's enabling provisions from the Board of Claims Act to the Procurement Code and that the legislature intended thereby to eliminate the Board's jurisdiction over any claims arising from contracts implied-in-law, or quasi-contracts. Furthermore, the jurisdictional language "all claims against the Commonwealth arising from contracts," as commonly understood to include both express and implied contract claims, is now subject to the definition of the term "contract" under the Procurement Code as a written executed agreement. Also, the Board's Fiscal Code jurisdiction added in 1978 was now eliminated.

The Board relied upon Employers Ins. of Wausau v. Department of Transportation, 581 Pa. 381, 393, 865 A.2d 825, 832 - 833 (2005) (Wausau), where the court held that under the Board of Claims Act "claims arising from contracts involving the Commonwealth could sound in both assumpsit and equity, and . regardless of form, these claims should be decided by the Board of Claims." Also, the court noted that Section 1724(a)(1) of the Procurement Code replaced Section 4 of the Board of Claims Act and that they are substantively identical.Noting that the Board and its predecessor tribunals date back for almost 200 years, the Board overruled DOH's preliminary objections and reasoned in part as follows:

[T]he equitable remedy of quasi-contract or claims for unjust enrichment against the Commonwealth has been available to its citizens for meritorious claims for this same two centuries. . [T]his history of legislation and practice shows us that the General Assembly intended this equitable remedy, begun with the original Board of Claims in 1811, be preserved and consolidated in the present day Board by the explicit statement in the 1978 amendment to the Board of Claims Act. . It is for this reason, perhaps more than any other, that we find it so difficult to believe that the Legislature intended to eliminate the Board's long-standing equity jurisdiction by Act 142 [of 2002] without an express provision or statement to that effect. The omission . is even more curious when we note that, in contrast to the absence of any mention of removing equity jurisdiction, the Legislature very specifically included in subsection (c) of § 1724 an express statement that the Board would no longer have power to exercise its jurisdiction over certain enumerated types of contract claims, naming, inter alia, claims from providers of medical assistance under the Public Welfare Code. In fact, we find this omission a very significant indicator that the Legislature did not intend to modify the Board's jurisdiction to exclude claims arising from implied contracts but merely to eliminate DPW claims and otherwise modernize and incorporate the Board's enabling provisions into the Procurement Code.

Board's Opinion, pp. 5 - 6 (citations omitted) (footnote omitted).

The Board took note of the salient statutory construction principles set forth in Section 1921 of the Statutory Construction Act of 1972, 1 Pa. C.S. §1921. It cited Pennsylvania Associated Builders and Contractors, Inc. v. Commonwealth Department of General Services, 593 Pa. 580, 932 A.2d 1271 (2007), where the Supreme Court reaffirmed the principle that clear and unambiguous statutory language is not to be ignored in pursuit of the spirit of a statute and indicated that the Procurement Code recognizes that the term "contract" is not necessarily limited to the general definition in Section 103, as amended, 62 Pa. C.S. §103. The Board determined that its historic jurisdiction over claims arising from implied contracts provided the context for interpreting the general definition of "contract" and that the legislature would not eliminate the Board's jurisdiction over implied contracts by employing an obtuse method of relocating its jurisdictional phrasing and relying on a general definitional section. Further, sovereign immunity has been waived under Section 1702.*fn3 The Board therefore overruled the preliminary objections.*fn4

DOH argues that Section 1724(a)(1) of the Procurement Code plainly grants jurisdiction in the Board only over claims arising from contracts. DOH contends that, pursuant to the general definition of "contract" in Section 103, the Board lacks jurisdiction because no written executed agreement exists between the parties.*fn5 Moreover, the Board erred in relying on history and presumed legislative intent to hold that the general definition does not apply to Section 1724 when the court in Pennsylvania Associated Builders disapproved of relying on extraneous factors where a statute's language is clear and unambiguous. In short, the general definition remains the same for every question. Also, Sections 1711.1 and 1712.1, 62 Pa. C.S. §§1711.1 and 1712.1 (dealing with solicitation or award protests and contract controversies), do not broaden the Board's jurisdiction, and any exceptions to sovereign immunity under Section 1702 must be narrowly construed.

Next, DOH argues that the 2002 Act extinguished Board jurisdiction over equity claims brought in assumpsit that do not arise from a written contract. The Board's jurisdiction over equity claims not arising from contracts stemmed from Section 1003 of The Fiscal Code, Act of April 29, 1929, P.L. 343, as amended, 72 P.S. §1003, incorporated into the Board of Claims Act in 1978. In Miller v. Department of Environmental Resources, 578 A.2d 550 (Pa. Cmwlth. 1990),this Court acknowledged that the Board's equity jurisdiction under The Fiscal Code extends to quasi-contract and quantum meruit claims. The legislature intentionally excluded from Section 1724(a) of the Procurement Code language referencing Fiscal Code jurisdiction when it relocated the Board's jurisdictional provision from the Board of Claims Act, and Wausau held that the Board retains jurisdiction only over equitable claims arising from written contracts.

Data-Quest's counter-argument is that the 2002 Act did not extinguish the Board's jurisdiction over quasi-contract claims and that under the Procurement Code a contract is not always a written agreement. To the contrary, the Code does not expressly preclude the Board from hearing quasi-contract claims, and Miller did not hold that The Fiscal Code is the only basis for the Board's jurisdiction over such claims. Data-Quest notes that Wausau did not consider the question now before this Court and that DOH misstated the Board's reliance upon Pennsylvania Associated Builders. The Board recognized the court's holding that the term "contract" is not limited to the Section 103 general definition if the context clearly indicates otherwise, andit considered the historical context in interpreting Section 1724(a). Also, the regulation at 61 Pa. Code §899.105(2) provides for the Board's jurisdiction over claims arising from implied contracts. More particularly, DOH's interpretation would undo 200 years of the Board's jurisdiction.

Data-Quest cites Buckwalter v. Borough of Phoenixville, 940 A.2d 617, 623 (Pa. Cmwlth.), appeal granted, 598 Pa. 210, 955 A.2d 1014 (2008), for the principle that when the legislature seeks to depart from a "long standing" policy it must express its intent to do so explicitly. Also, DOH's interpretation would unconstitutionally deprive Data-Quest of its reasonable expectation of entitlement to bringing its claims in a forum that has existed for 200 years, and sovereign immunity does not apply as the government would face no operational difficulty from vendors' quasi-contract claims. In its reply brief, DOH reiterates many of the arguments in its main brief, and it asserts, inter alia, that the 2002 Act restricted the definition of "contract" even more by ...

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