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The Harrisburg Authority, et al v. Cit Capital Usa

June 27, 2012

THE HARRISBURG AUTHORITY, ET AL., PLAINTIFFS,
v.
CIT CAPITAL USA, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. John E. Jones III

MEMORANDUM OPINION

I. FACTUAL BACKGROUND

The case sub judice involves The Harrisburg Authorities' ("THA") project to upgrade and modernize the Harrisburg Materials, Energy, Recycling and Recovery Facility, a trash-to-steam waste treatment facility ("the incinerator"). (Doc. 35 ¶¶ 1, 10). To finance the incinerator project, THA issued a series of bonds, including its Guaranteed Resource Recovery Facility Revenue Bonds, Series D of 2003 (the "2003D Bonds"), Guaranteed Federally Taxable Resource Recovery Facility Revenue Bonds, Series E of 2003 (the "2003E Bonds"), and Guaranteed Federally Taxable Resource Recovery Facility Revenue Bonds, Series F of 2003 (the "2003F Bonds"), under a Trust Indenture dated December 1, 2003 (the "Retrofit Indenture") between THA and Commerce Bank/Pennsylvania, National Association. (Id. ¶ 11). Dauphin County ("Dauphin" or the "County"), recognizing the countywide benefits of the project and its responsibilities for municipal waste planning, entered into agreements with THA to provide secondary guarantees for the 2003D Bonds and 2003E Bonds, for a total amount not to exceed $110,980,000. (Id. ¶ 12).

THA contracted with Barlow Projects, Inc. ("Barlow") to design the incinerator, retrofit the facility, and provide state-of-the-art "Combustion Technology." (Id. ¶¶ 14, 16.) The agreement between THA and Barlow was memorialized in three separate contracts in May 2004. In the "Equipment Contract," THA agreed to pay almost $52 million for the proprietary and other specialized equipment necessary to retrofit the incinerator. (See id. ¶ 18(I)). In the "Services Contract," THA agreed to pay almost $13 million to Barlow for engineering, construction, and start-up of the incinerator. (See id. ¶ 18(II)). Finally, in the "Sublicensing Agreement," THA purchased a nonexclusive license for the use Barlow's proprietary Combustion Technology which was to be installed in the incinerator. (See id. ¶ 18(III)).

The retrofit of the incinerator was originally scheduled to be completed in twenty-four months, and the facility was to be restarted in late 2005. (See id. ¶ 21).

This was not to be. Plaintiffs THA and Dauphin allege that Barlow was negligent in its work, breached its contract with THA, and that Barlow's design flaws, unsuitable equipment, construction delays, poor project management, and lack of financial resources prevented the incinerator project from being completed.*fn1 (Id. ¶ 17). In late fall of 2005, Barlow was increasingly behind schedule and out of money, despite having received substantially all of the contract price from THA. (Id. ¶¶ 22-23). Barlow eventually obtained additional capital in the amount of $25 million from defendant CIT Capital USA Inc ("CIT"). (Id. ¶ 24).*fn2

To secure CIT's funding, a "Restated Sublicensing Agreement" ("RSA") replaced the original Sublicensing Agreement ("SLA"). (See id. ¶ 26.) Through the RSA, Barlow Projects Harrisburg, LLC ("Barlow"), the Barlow entity which had licensed the rights to the Combustion Technology from Barlow for purposes of the incinerator project, licensed that technology to THA in exchange for $25 million in fees. (See Doc. 36 ¶¶ 19, 24-25). Barlow then assigned its rights to payment from THA to a newly created Barlow entity, Aireal Technologies of Harrisburg, LLC ("Aireal"). (Id. ¶ 24(b)). THA consented to this assignment. (Id. ¶ 24(c)). Finally, CIT purchased Barlow's interest in Aireal for $25 million. (Id. ¶ 24(e)). The $25 million from CIT was used by Barlow to continue work on the incinerator project. (Id. ¶ 28). As a result of these transactions, THA allegedly became obligated to pay the restated $25 million license fee to Aireal, which is now owned by CIT.

Plaintiffs allege that the RSA is unenforceable for lack of consideration because THA had already paid Barlow $2.7 million in full satisfaction of the original license fee six months prior to entering into the RSA. (Doc. 35 ¶¶ 40, 50-51). Plaintiffs also assert that THA's execution of the RSA was an ultra vires act in violation of THA's authority and Pennsylvania's Municipal Authorities Act ("MAA"), 53 PA. CONS. STAT. § 5601, et seq., in that THA agreed to pay for a license for which it had already paid in full and, effectively, agreed to guarantee the debts of its private party contractor. (Id. at ¶¶ 52, 70). Plaintiffs also contend that, pursuant to Amendment Number 9 ("Amendment 9") to the Equipment Contract, Barlow and its associated entities assumed all of THA's payment obligations, and that THA's only obligation was to forward payments from Barlow to CIT. (Id. ¶ 57, 61).

In March 2007, THA failed to make payments to Aireal as purportedly required by the RSA. (Doc. 35 ¶ 101; Doc. 36 ¶¶ 31, 32.) In June 2007, THA, Aireal, and CIT entered into a Forbearance Agreement, which acknowledged THA's obligations under the RSA. (Doc. 35 ¶ 101). Plaintiffs allege that the Forbearance Agreement merely repeats the invalid and unenforceable provisions of the RSA and therefore it is void. (Id. ¶¶ 101, 103). Upon expiration of the forbearance period in November of 2007, CIT and Aireal provided notice to THA of its default under the RSA, gave THA the required sixty-day (60) period to cure the default, and notified THA of their intent to seek legal remedies if the default was not cured. (Id. ¶ 107, Ex. J.)

Before expiration of the sixty-day grace period, Plaintiffs THA and Dauphin filed suit asserting two claims against CIT and Aireal: one seeking a declaratory judgment that, inter alia, the RSA is void and unenforceable, (id. at Counts I, III), and one seeking a permanent injunction enjoining CIT and Aireal from enforcing, inter alia, the RSA. (Id. at Counts II, IV). CIT and Aireal both counterclaimed against THA for breach of the RSA in Counts I-III, promissory estoppel in Count IV, unjust enrichment in Count V, injunctive relief in Count VI, fraud in Count VII, and tortious interference with contract in Count VIII. (Doc. 36).

II. PROCEDURAL HISTORY

The instant suit was originally filed in the Dauphin County Court of Common Pleas on January 3, 2008. (Doc. 1, Ex. 1). Defendants*fn3 timely filed a notice of removal with this Court on January 30, 2008. (Doc. 1). A motion to remand the case to state court filed by THA on February 14, 2008 was denied on May 30, 2008. (Doc. 26). Thereafter, an amended complaint was filed by THA on October 31, 2008, (doc. 35), and an amended answer and counterclaim was filed by CIT and Aireal on November 1, 2008. (Doc. 36). THA and Dauphin then filed answers to CIT's counterclaim on December 11, 2008. (Docs. 42, 43). On March 11, 2009, the Court granted Dauphin's motion to amend/correct its answer to the counterclaim to assert the affirmative defense of governmental immunity, (doc. 56), which it subsequently filed on March 18, 2009. (Doc. 58).

After the filing of a motion to compel on March 30, 2009, (doc. 59), we referred the motion and any forthcoming discovery disputes to Magistrate Judge J. Andrew Smyser. (Doc. 70). On July 14, 2009, Judge Smyser granted in part and denied in part the motion to compel. (Doc. 78). Subsequently, THA filed an appeal of the magistrate judge's decision on July 24, 2009, (doc. 79), which we affirmed on June 14, 2010. (Doc. 96). On November 3, 2010, THA and CIT filed cross motions for summary judgment, (docs. 102 and 121), which we denied in their entirety on May 18, 2011. (Doc. 149).

Also on November 3, 2010, Dauphin filed a motion for summary judgment in its capacity as counterclaim Defendant. (Doc. 105). Dauphin also filed a motion for partial summary judgment in its capacity as Plaintiff, (doc. 112), and supporting brief, (doc. 114), on November 3, 2010. CIT filed a cross motion for summary judgment on November 3, 2010. (Doc. 119). After full briefing of the motions for summary judgment, we issued a memorandum and order on June 21, 2011 granting Dauphin's motion for summary judgment in its capacity as counterclaim Defendant, denying Dauphin's motion for partial summary judgment in its capacity as Plaintiff, and denying CIT's motion for summary judgment against Dauphin on its claims. (Doc. 150 at 30-31).

Thereafter, Dauphin filed a motion in limine, (doc. 162), on December 6, 2011, and together with THA filed a motion in limine regarding whether undisputed facts admitted at summary judgment are deemed admitted for purposes of trial. (Doc. 164). Also on December 6, 2011, CIT filed a motion in limine concerning inadmissible parol evidence. (Doc. 166). After full briefing on the motions, we issued an order dated December 28, 2011 denying Dauphin's motion in limine to preclude the testimony of Thomas F. Smida Esq. ("Smida"), denying THA's and Dauphin's motion in limine regarding whether undisputed facts admitted at summary judgment are deemed admitted for purposes of trial, and denying CIT's motion in limine regarding inadmissible parol evidence. (Doc. 176 at 13).

Moreover, on December 28, 2011, David Unkovic, the now former Receiver for the City of Harrisburg (the "City"), filed a Motion to Intervene pursuant to Federal Rule of Civil Procedure 24. (Doc. 177). We granted the motion to intervene on December 29, 2011. (Doc. 178). From January 4, 2012 through January 12, 2012 the Court conducted a bench trial for this case. At the conclusion of trial, the Court ordered that the parties submit post-trial briefs within forty-five (45) days of the filing of the official transcript, and ordered that responsive briefs be filed within thirty (30) days thereafter. (Doc. 200 at 2). On motion of the parties, we granted a request to exceed page limitation and increased the page limit to sixty (60) pages. (Doc. 215). The Office of Receiver, THA, Dauphin, and CIT each filed a post-trial brief on March 12, 2012. (Docs. 216, 217, 218, 219). Responsive briefs were filed by each of the parties on April 11, 2012. (Docs. 222, 224, 223, 221). Therefore, having timely received all of the requested submissions, we will proceed to discuss the contested issues pertinent to our analysis and ultimate disposition.

III. DISCUSSION

At the outset, we note that as the dispute between the parties presents a complex series of issues involving mixed questions of law and fact, our analysis of the questions to be decided will generally follow the chronology of the events and arguments as presented by THA, CIT, and Dauphin in their post-trial submissions.

A. Burden of Proof

As a preliminary matter, we highlight that our analysis is guided by the burden of proof for this declaratory judgment and permanent injunction action, which rests with Plaintiffs THA and Dauphin. See Fireman's Fund Ins. Co. v. Videfreeze Corp., 540 F.2d 1171, 1175 (3d Cir. 1976). The Third Circuit in Fireman's Fund Insurance Company noted that there are four factors courts should consider in determining which party bears the burden of proof, they include: "(1) whether the plaintiff objected to assuming the burden of proof; (2) which party asserted the affirmative of the issue; (3) which party would lose in the absence of any evidence on the issue; [and] (4) what sort of relief is sought." Id.

Although the Fireman's Fund Insurance Company court noted that the forum's law would govern a question concerning burden of proof, because such an issue is substantive as opposed to procedural, we are unaware of any specific Pennsylvania case law discussing the proper burden of proof in the context of a declaratory judgment action. Id. at 1175. Therefore, we shall proceed to analyze the burden of proof issue under the factors enunciated by the Third Circuit in Fireman's Fund. Here, we do not find that Plaintiffs have objected to assuming the burden of proof at any time prior to or during trial. Moreover, Plaintiffs have affirmatively raised the declaratory judgment and permanent injunction issues, and if there was in fact an absence of evidence on the contested issues, Plaintiffs would lose. Finally, as previously mentioned, because Plaintiffs seek a declaratory judgment and permanent injunction we find no reason why the burden of proof should not reside with Plaintiffs. See id. ("Courts understandably balk at imposing the burden of proof on unsuspecting defendants after the plaintiff in a declaratory judgment action has voluntarily assumed the burden of proof and has given no notice of its claim that the defendant should bear the burden.") (citing Liberty Mutual Ins. Co. v. Sweeney, 216 F.2d 209, 211 (3d Cir. 1954)).

B. THA's Authority to Enter into the RSA.

At trial, and in its post-trial submissions, CIT*fn4 argues that THA possessed the authority to enter into the RSA, and that nothing in the MAA precluded it from doing so. (Doc. 219 at 9). In fact, the MAA specifically states that municipal authorities may be created to own and operate entities such as incinerators, and that "[e]very authority may exercise all powers necessary or convenient for the carrying out of the purposes set forth in this section." (Id. at 9 (citing 53 PA. CONS. STAT. ANN. § 5607 (a), (d))). Furthermore, it emphasizes that the statute permits municipal authorities to "make and issue . . . other evidences of indebtedness or obligations," (doc. 122 at 9 (citing § 5607(d)(12))), "to execute all instruments necessary or convenient for the carrying on of its business," (doc. 122 at 14 (citing § 5607(d)(13))), "to finance projects," (doc. 122 at 15 (citing § 5607(d)(6))), and "to lease as lessee and use any franchise, property, real, personal or mixed, tangible or intangible, or any interest therein necessary or desirable for carrying out the purposes of the authority, and to sell, lease as lessor, transfer and dispose of any property or interest therein at any time acquired by it." (Doc. 122 at 15 (citing § 5607(d)(4))). Therefore, CIT maintains, the MAA clearly authorized THA to enter in the RSA.

In addition, CIT cites the testimony of numerous witnesses at trial who testified to the benefit THA received from executing the RSA. For example, Andrew Giorgione, Esq. ("Giorgione"), Special Counsel to THA, testified as follows: "Q: And it was within the Harrisburg Authority's best interests to see the project continue, correct? A: Of course. Q: And continue if possible with the least disruption possible? A: Yes." (Doc. 219 at 9 (citing Doc. 202 162:20-163:1)). It also notes Giorgione's testimony that there was "enormous pressure" to finish the incinerator at least by the time the bond payments became due. (Id. (citing Doc. 202 at 154:21-25)). Moreover, CIT emphasizes that contractors were threatening to cease work, and lawsuits were threatened against Barlow and THA. (Id. (citing Doc. 158-3 ¶ 33)). It highlights the testimony of Dan Lispi ("Lispi"), Project Manager for THA's Retrofit Project, who stated:

[d]ebt service was capitalized during construction, so there were no payments of debt service until June of 2006, but after that the Authority would be liable for paying debt service. So the debt service required that revenues had to be generated, so the plant had to be up and operating and making money in order for all that to happen. So between Barlow and the Authority and the Authority's agents, you know, we all got together and we wanted to determine well, how much more money was . . . going to be required to complete the facility and how were we going to be able to get that money. (Id. at 10 (citing Doc. 204 at 217:11-24)). CIT also cites the testimony of Lucien Calhoun ("Calhoun"), its expert witness, who testified that "[t]he bondholders only can benefit if the facility operates." (Id. at 11 (citing Doc. 207 at 32:5-6)). CIT maintains that the above testimony, and more adduced at trial, illustrates the belief of the parties involved in the transaction, including THA and the bondholders, that it was vital for the retrofit of the incinerator to continue.

In opposition, THA contends that the MAA provides, "the powers of each authority shall be exercised by a board." (Doc. 217 at 33 (citing 53 PA. CONS. STAT. ANN. § 5610(a))). Consequently, it argues there is no legal support for the delegation by a municipal authority of its contract making power to any employee. (Id. at 34 (Sampson Bros., Inc. v. Monroeville Water Auth., 112 Pitts. L.J. 203, 206 (Allegheny County 1964))). Moreover, it cites 65 PA. CONS. STAT. ANN. § 704 for the proposition that the legislature requires "official action" on a matter of "agency business" to be raised at an open, public meeting in accordance with the Sunshine Law. (Id. at 34 (citing Waymart Water Co. v. Waymart, 4 Pa. Super. 211 (1897) (holding that a borough council "must exercise its powers by joint action as a board. Loose discussions without any motion or united action are not sufficient.") (internal citations omitted))).

Here, we agree with CIT that neither Sampson Brothers, Incorporated nor Waymart Water Company stand for the proposition that a board can not delegate such contractual authority to its officers. Regarding Sampson Brothers, Incorporated, this case presented the question of whether "the oral agreement plaintiffs aver represent[s] a valid exercise of the Authority's contract-making power?" Sampson Bros. Inc., 112 Pitts. L.J. at 205. There, the court ruled that an oral agreement between the plaintiff contractor and a municipal employee was not enforceable because to allow such a contract to stand "without competitive bidding simply does violence to the whole rationale and public policy underlying the requirements and safeguards which have been erected to regulate the execution of public contracts." Id. at 208. We find THA's reliance on this case to be misplaced because the court's invalidation of the contract centered primarily upon the insufficiency of a single municipal employee's authority to bind the entity through an oral agreement. In contrast, here we are confronted with not only one municipal representative, but numerous THA officials, including the board chairman, executive director, and solicitor who were explicitly authorized to transact business on behalf of THA in order to close a deal on the incinerator. Moreover, the express intent of such officials to bind THA to the RSA was memorialized through numerous written documents.

As to THA's reliance on Waymart Water Company, we agree with CIT that while this case did involve a claim that a local municipality exceeded its authority regarding the purchase of six fire hydrants, it was the defendant in that case who raised this argument in opposition to the plaintiff's contention that the agreement encompassed more than merely the sale of six hydrants, but also included an agreement to purchase water for a term of ten years and to pay a corresponding rent per hydrant for the supply of water. 4 Pa. Super. 211, 217-19 (Pa. Super. Ct. 1897). As it was the plaintiff who sought to prove that the burgess acted within the authority granted him by virtue of the borough council's resolution, the court held that "[i]t was incumbent on the plaintiff to prove the assent of the borough council to the contract executed by the burgess; for without that the borough would not be bound although the paper was executed with all due formality." Waymart Water Company, 4 Pa. Super. at 218. Notably, the Waymart court found that the plaintiff's two witnesses, who testified that they only recalled discussing the purchase of the hydrants at the borough council meeting, failed to sustain the plaintiff's burden through parol evidence that the agreement was in fact broader than the authorizing resolution. Id.

We find this case to be distinguishable from the instant matter because in the case sub judice, THA executed numerous documents evidencing its firm intent to be bound to the transaction, documents that it now strenuously seeks to disembowel. For example, THA voluntarily entered into the RSA through the 2005 Resolution and executed the RSA and Consent to Assignment, both of which expressly represented its intent to enter into the RSA. (Doc. 204 at 150:6-13 (Mealy testifying: "Q: Were you aware of any misstatement by CIT that resulted in the Harrisburg Authority signing this agreement? A: No.")).

For example, the Resolution approved at THA's December 21, 2005 meeting specifically provides that "[t]he Authority approves and authorizes entry into a First Amended and Restated NonExclusive Technology Sub-Licensing Agreement and Consent to Assignment thereof in substantially the form attached hereto, or as may be further amended and restated by the consent of the Authority Chairman, Executive Director and Solicitor." (J.E. 12 ¶ 4) (emphasis added). Therefore, we find any argument by THA that its officials lacked the proper authority to enter into the RSA to be disingenuous given that the Resolution was appropriately adopted on December 21, 2005 "by the board of The Harrisburg Authority in lawful session. . . ." (Id.).

We also find the Commonwealth Court's decision in Beaver Dam Outdoors Club v. Hazleton City Authority to be instructive. 944 A.2d 97 (Pa. Commw. Ct. 2008). In that case, one of the questions that confronted the court was whether a prior board of the authority performed an ultra vires act by approving and executing a lease. Id. at 107. The court emphasized that "[g]enerally, authorities are established for the purpose of financing and managing revenue producing projects of a public nature or other activities that are not considered to be part of core governmental activities; they are a government business venture, a form of quasi-privatization." Id. at 110 (citing Boyle v. Mun. Auth. Of Westmoreland Cnty.,796 A.2d 389, 393 (Pa. Commw. Ct. 2002)).

In discussing whether a municipal authority can enter into a long-term contract, binding upon its successors, the court held that "[i]f the contract relates to a governmental function, it cannot bind successors; however, if the contract relates to a proprietary function, it can bind successors." Id. at 111. Furthermore, the court listed three factors to consider in evaluating whether activity is governmental or proprietary, and noted that an affirmative answer to any of the inquiries renders the function proprietary: "(1) the activity is one that government is not statutorily required to perform; (2) the activity also may be carried on by private enterprise; or (3) the activity is used as a means of raising revenue." Id. at 111. Under the first factor, the local government is not required to provide incinerator services to the public. As to the second factor, the operation of the incinerator could be carried on by a private enterprise. Concerning the third factor, after the payment of its debt obligations, the incinerator would presumably be used a means of raising revenue. See also Program Admin. Servs. v. Dauphin Cnty. Gen. Auth., 874 A.2d 722, 726-29 (Pa. Commw. Ct. 2005) (concluding that 53 PA. CONS. STAT. ANN. § 5607(d)(12) conferred upon an authority the power to lend money to school districts for financing and that such an act was proprietary in nature and therefore bound successor boards because it was an activity not required by statute, it is one that is carried on by private lenders, and it was designed to raise revenue for the authority). Therefore, based on the affirmative answers to each of the preceding factors, we find that THA engaged in proprietary acts in negotiating and executing the 2005 Resolution and the RSA, and as such its officials were properly authorized to bind THA to the subject transactions.

C. The City of Harrisburg's Consent.

In its post-trial submission, as at trial, THA contends that the City Consent was not submitted to, or approved by, City Council as required by Pennsylvania law. Citing Vartan v. Reed, it claims that the Mayor may only execute agreements that have been approved by City Council. (Doc. 217 at 31 (citing 677 A.2d 357, 361 (Pa. Commw. Ct. 1996))). THA also points to the Pennsylvania Commonwealth Court's decision in Capital City Lodge No. 12 v. Pennsylvania Labor Relations Board where the court held that "the Mayor [Mayor Reed] had no authority to negotiate contracts imposing financial burdens and obligations on the City without approval of the City Council."(Id. (citing 30 A.3d 1241, 1244-45 (Pa. Commw. Ct. 2011))). It further claims that because CIT was the party asserting the validity of the documents comprising this transaction, that it had the burden of proof regarding the existence of a valid Consent from the City. (Id. at 32).

THA maintains that the "Form of Consent and Agreement" attached to the December 21 resolution provided consent to a completely different transaction. (See J.E. 12). Thus, it asserts that the "consent" document presented to the THA board on December 21, and the document signed on January 11, are not the same document. (Doc. 217 at 35). In particular, it argues that on December 27, 2005, the structure of the RSA changed dramatically eliminating references to "collateral" and remedies for THA and instead substituting the following in its place: (1) the hell or high water provision; (2) the deletion of any rights or defenses of THA; (3) a provision regarding operating expenses; and (4) allegedly oppressive remedies in favor of CIT. (Id. at 35-36). THA further claims that the Forbearance Agreement failed to cure the inherent issues surrounding approval of the RSA because it was approved by THA on June 27, 2007, more than seventeen (17) months after the RSA was signed. (Id. at 37). In addition, it emphasizes that the RSA referenced in the Forbearance Agreement was never attached to it.

On the other hand, CIT highlights the testimony of Dan Miller, Controller for the City of Harrisburg, who testified as follows:

Q: If I understand the import of your testimony, Mr. Miller, it's simply that because these documents are not an expenditure from your perspective, there was no need for the controller to sign them, correct?

A: Correct.

Q: So the controller's signature was essentially superfluous correct?

A: I believe the controller could not sign them because he wasn't authorized, they weren't authorized by city council, and really they're not just related to expenditures either.

Q: Well, then his signature is just superfluous, right?

A: That could be, yes. (Doc. 219 at 48 (citing Doc. 206 at 94:25-95:14)). It also maintains that based on the testimony of Bruce Foreman ("Foreman"), THA's Solicitor from approximately 2003 until after the instant litigation was filed, the City's consent was irrelevant. (Id. (citing Doc. 205 at 206:12-208:3 (Q: Do you have a legal view as to what the city's role is when the Authority transacts this type of business, that's the Harrisburg Authority? A: No, I don't think the Authority, I don't think the city would have to, would have to consent to the Authority taking this action. Q: You don't believe that the city has a role in that? A: No. . . Q: So your view is that the Authority could act absent any consent or any imprimatur put on the transaction by the city of Harrisburg, your view as a solicitor or as the general counsel for the -- A: Outside of a contractual, outside some obligation we had under a bond or some other contract with them, but as a general matter yes."))). All of this, it claims, renders unavailing THA's argument that the invalidity of the consent of the City of Harrisburg nullifies the RSA.

Concerning THA's consent, CIT points to Resolution No. 2005-019, executed by THA at its December 21, 2005 meeting, which provides "[t]he Authority approves and authorizes entry into a First Amended and Restated NonExclusive Technology Sub-Licensing Agreement and Consent to Assignment thereof in substantially the form attached hereto, or as may be further amended and restated by the consent of the Authority Chairman, Executive Director and Solicitor." (Doc. 219 at 12 (citing Joint Exhibit ("J.E.") 12 at THA09208*fn5 )). As a result, CIT maintains that the 2005 Resolution explicitly authorized entry into the RSA through the actions of THA's Chariman, Executive Director, and Solicitor.

While THA argues that the Resolution approved by it on December 21, 2005, and the one signed on January 11, 2006, bear little resemblance to one another, as CIT notes, THA failed to explain what the differences were, if any, between the 2005 Resolution and the final version of the Consent to Assignment. Moreover, Giorgione testified as follows: "Q: And by this authorization, by this resolution the board of the Harrisburg Authority permitted the Authority chairman, executive director, and solicitor to further amend and restate the sub-licensing agreement, correct? A: It appears, yes." (Doc. 202 at 174:22-175:2). CIT also highlights Thomas Mealy's testimony, THA's Executive Director at the time, who stated that the 2005 Resolution authorized THA's chairman, executive director, and solicitor to amend and restate the RSA, regardless of whether the changes are material or not. (Doc. 219 at 12-13 (citing Doc. 204 at 146:25-147:16 (Q: And indeed as you can see from this language in the Harrisburg Authority resolution, if the consent of the Authority chairman, the executive director, and solicitor had been obtained, there was no need to go back to the Harrisburg Authority board to get approval, correct? A: Correct."))). In accordance with the 2005 Resolution, CIT highlights that THA's Chairman John Keller signed the RSA, (J.E. 38 at THA06625), the solicitor signed a written opinion regarding the RSA, (Defendant's Exhibit ("D.E.") 30 at 3), and that Executive Director Mealy, the chairman, and solicitor all met in the Mayor's Office on January 9, 2006 at which time Giorgione conveyed the details of the transaction to those present. (Doc. 219 at 13). Moreover, Mealy testified as follows:

Q: And the signing of this [the RSA] by the chairman, was that done with the knowledge and consent of Mr. Foreman, the solicitor?

A: Yes.

Q: And the signing of this by Mr. Keller, the chairman, it was done by, was done with the consent also of you, correct, Mr. Mealy? . . .

A: Yes, but I would have to say that I was relying on the solicitor.

Q: That's fine. Nonetheless, you gave the consent, didn't you?

A: Uh-huh.

Q: Yes?

A: Yes. (Doc. 204 at 148:14-149:8).

CIT also emphasizes that when Giorgione was asked what he understood the language "ratified and confirmed" to mean in the Forbearance Agreement, he testified "[t]hat the sublicensing agreement was, you know, a valid document and the Authority was bound by it." (Doc. 219 at 17 (citing Doc. 203 at 104:8-12)). It claims that despite THA's argument that ratification of the RSA is ineffective because it occurred seventeen (17) months after the agreement was executed, THA failed to provide any legal authority for this assertion. CIT cites Foreman's testimony where he testified as follows: "Q: And, sir, with regard to the advisability of waiting seventeen months before ratification, doesn't that really depend on the circumstances and the reason why a ratification is requested at any one point in time? A: Correct." (Doc. 219 at 17-18 (citing Doc. 205 at 194:1-6)).

Significantly, Giorgione represented to CIT that THA's resolutions and amendments were completed as "provided to you prior to the holiday." (J.E. 12 at MVA003159A). Additionally, Keith Mrochek, counsel to CIT, testified that "[o]ur understanding was that the resolutions done by the Authority that were delivered to us in, I think they were described as Joint Exhibit Number 12, were sufficient to authorize this transaction on behalf of the Authority." (Doc. 207 at 98:15-19). CIT also maintains that THA ratified the RSA through its conduct. It cites the Pennsylvania Commonwealth Court's decision in Pittsburgh Baseball, Incorporated v. Stadium Authority of the City of Pittsburgh, for the proposition that "municipal inaction plus the acceptance of benefits under the contract may constitute ratification." (Doc. 219 at 19 (citing 630 A.2d 505, 509 (Pa. Commw. Ct. 2009))). CIT notes that THA's initiation of forbearance discussions with CIT is evidence of THA's belief that the payment of license fees under the RSA was a valid obligation on its behalf. (Id. at 19-20). Thus, it maintains that THA's inaction for two full years after CIT expended $25 million on the incinerator constitutes ratification of its obligations under the RSA and acts to cure any defects in authorization that may have existed.

Additionally, CIT claims that THA is estopped from disavowing the validity of the RSA. Relying on Albright v. City of Shamokin for the proposition that "[a] municipality like a private corporation is subject to the doctrine of estoppel" and "may be estopped to deny the authority of its agents and employees to act if it has the power to act," CIT argues that allowing THA to renege on its representations after it received the benefit of $25 million would be unconscionable. (Id. at 20-21 (citing 419 A.2d 1176, 1178 (Pa. Super. Ct. 1980) (holding that the city was estopped from denying retirement benefits, even though the retirement plan did not conform to the Third Class City Code, because "[i]t would be a cruel hoax to permit the municipality, after appellee had retired from his employment upon the promise of the City to pay him benefits of $100 per month, to withdraw its promise."))). As to the representations THA made in this case, Mrochek testified to the following at trial:

Q: Do you know if CIT relied upon the representations in the [RSA] in agreeing to provide the 25 million dollars for the retrofit project?

A: I know that they could not have gotten the project approved or the deal approved without those representations and warranties.

Q: And are you saying CIT couldn't get the deal approved by its own credit committee without those representations and warranties?

A: That's correct. At least that was our understanding. (Id. at 21 (citing Doc. 207 at 94:18-95:4)).

Here, we find it significant that section 8(b)(i) of the RSA explicitly provides:

[t]he Authority is authorized to enter into this Agreement; this Agreement does not conflict with any applicable law, contract, lease, instrument or other obligation to which it is a party or by which it is bound; and this Agreement represents a valid and binding obligation of the Authority, enforceable according to its terms. (J.E. 38 at 6). Furthermore, the last clause in section 8 states "[p]rior to execution of this Agreement, the Authority shall provide to Licensor/Seller an opinion of counsel satisfactory to Licensor/Seller addressing the representations contained in Sections 6(d) and 8(b)(i) above and such other matters reasonably requested by Licensor/Seller." (Id.).

Additionally, we find THA's reliance on Vartan v. Reed to be unavailing, because although the Pennsylvania Commonwealth Court held that the Mayor could only enter into agreements that had been approved by City Council, the agreement purportedly contained a provision stating that "the City agreed that Vartan's plan had been deemed approved; that Council would agree to sign any final plan, . . .." Vartan, 677 A2d at 360. Thus, in that case there was apparently a belief that City Council approval was necessary for the action, and as a result an express representation was made in the settlement documents suggesting that City Council would sign the final plan. Id. In contrast here, there was no representation from THA that City Council approval was necessary, or even contemplated, in entering into the RSA. In fact, THA's officials went to great lengths to assure CIT that it in fact had the authority to restate the original SLA. Moreover, given the language of the Resolution executed on December 21, 2005, there was apparently no belief on the part of THA that it was required to involve City Council in this transaction because it was already vested with the authority to transaction business pertaining to the incinerator. (J.E. 38 at 6).

We also find THA's citation to Capital City Lodge No. 12 v. Pennsylvania Labor Relations Board to be distinguishable from the case sub judice. In Capital City Lodge, the Commonwealth Court invalidated an employment contract extension agreement entered into between former Harrisburg City Mayor Stephen Reed and the Fraternal Order of Police. Capital City Lodge No. 12, 30 A.3d at 1245. Specifically, the court noted that Section 413(c) of the Optional Third Class City Charter stated that "[a]ll bonds, notes, contracts and written obligations of the city shall be executed on its behalf by the mayor and the controller," and that "execute" means to "discharge the ministerial duties relating to a contract." Id. at 1244. Furthermore, the court highlighted that in Moore v. Reed, the Commonwealth Court held that "the Mayor had no authority to negotiate contracts imposing financial burdens and obligations on the City without approval of City Council," and that "[t]he authority to negotiate a valid and binding contract for a municipality is vested in the City Council. It is a legislative function. Without the assent of City Council, the municipality is not bound." Id. at 1244-45 (citing 559 A.2d 602, 603 (Pa. Commw. Ct. 1989)).

We find this case distinct from the instant matter because here, the authority of the Mayor to enter into a transaction is not at issue, as was the case in Capital City Lodge. Rather, in this case the issue is whether the authority delegated to THA to enter into a binding and enforceable contract was proper. Again, we reiterate that the MAA permits municipal authorities to be created for the purpose of owning and operating entities such as incinerators, see 53 PA. CONS. STAT. § 5607(a)(9), (d), and that such authorities are vested with the power "to lease as lessee and use any franchise, property, real, personal, or mixed, tangible or intangible, or any interest therein necessary or desirable for carrying out the purposes of the authority, and to sell, lease as lessor, transfer and dispose of any property or interest therein at any time acquired by it, see § 5607(d)(4), to "make and issue . . . other evidences of indebtedness or obligations, see § 5607(d)(12), and to "make contracts of every name and nature and to execute all instruments necessary or convenient for the carrying on of its business, see § 5607(d)(13). ...


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