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Seda-Cog Joint Rail Authority v. Carload Express, Inc.

Commonwealth Court of Pennsylvania

May 3, 2018

Seda-Cog Joint Rail Authority
v.
Carload Express, Inc., Susquehanna Union Railroad Company, and Northern Plains Railroad, Inc. Appeal of: Carload Express, Inc.

          Argued: April 10, 2018

          BEFORE: HONORABLE ROBERT SIMPSON, PATRICIA A. McCULLOUGH, BONNIE BRIGANCE LEADBETTER, Senior Judges.

          OPINION

          ROBERT SIMPSON, JUDGE.

         Carload Express, Inc. (Carload), a private railroad operator, appeals from an order of the Court of Common Pleas of Clinton County (trial court) granting summary judgment in favor of Seda-Cog Joint Rail Authority (Authority) and denying Carload's summary judgment motion. The Authority is subject to the Municipal Authorities Act (Act), 53 Pa. C.S. §§5601-5623. The trial court agreed with the Authority that a vote of seven of its board members in favor, three against, and six abstaining was insufficient to award an operating agreement to Carload. On appeal, we reverse the trial court's entry of summary judgment in favor of the Authority, and we remand for entry of summary judgment in favor of Carload.

         I. Background

         The Authority owns and maintains rail lines in several Pennsylvania counties. The Authority contracts with a private railroad operator to provide the actual freight services on the rail lines. The current operator is Susquehanna Union Railroad Company (Susquehanna).

         In 2014, the Authority issued a request for proposals (RFP) for a new operating agreement. The RFP provided for a two-stage selection process. The first stage was open to all operators desiring to submit proposals. From those initial proposals, the Authority selected three operators to participate in the second phase. In the second phase, the Authority evaluated those three operators and assigned point scores for various criteria. The RFP contemplated that the highest scoring operator would receive the new operating agreement.

         The Authority's Board of Directors has 16 members appointed by the various member counties. Based on their relationships with companies that deal with Susquehanna in some capacity, six board members voluntarily decided not to participate in the selection process. The parties disagree whether those members actually recused themselves or merely abstained from voting.[1] In either event, and of significance, it was clear to all parties throughout the selection process that no more than 10 votes would be cast in deciding which operator would be awarded the new operating agreement.

         The Act provides that an authority may take any permitted action upon the vote of a majority of the members "present" at a meeting, unless the authority's bylaws contain a different voting provision. 53 Pa. C.S. §5610(e). The Authority's bylaws do not vary from the voting provision of the Act, other than to state that a majority of the members will constitute a quorum. Reproduced Record (R.R.) at 121a.

         During the selection process, the Authority informed the candidates it would require the affirmative votes of at least nine board members before awarding a new operating agreement to any candidate. Thus, knowing that only 10 board members would be participating, the Authority essentially required nine of 10 votes to be cast in favor of a new operating agreement. The Authority did not include this purported requirement in the RFP; nor did it amend either the RFP or its bylaws to provide specifically for a majority vote of all members of the board in order to award an operating agreement. However, Carload did not protest this purported vote requirement when the Authority announced it.

         At the conclusion of the evaluations, Carload had the highest point score. Susquehanna was second, with just one point fewer than Carload. The Authority held a meeting attended by all 16 board members. There were seven votes in favor of awarding the new operating agreement to Carload, three opposed, and six abstaining. Based on its prior announcement of the nine-vote requirement, the Authority took the position that no new operating agreement was awarded.

         After Carload protested the Authority's refusal to award it the new operating agreement, the Authority filed a civil suit in the trial court, seeking a declaration that the 7-3 vote was ineffective to award the new operating agreement. Carload filed a counterclaim seeking declarations that the vote was effective and that the Authority was required to execute a contract awarding Carload the new operating agreement.[2]

         Ultimately, the trial court granted summary judgment in favor of the Authority. This appeal by Carload followed.

         II. Issues

         The Act requires a majority vote of the members "present" at a meeting in order for the Authority to act. 53 Pa. C.S. §5610(e). On appeal, [3] Carload contends the members "present" at a meeting, as that term is used in the Act, include only those members who actually vote. A quorum of the Authority was 9 members. As 10 members actually voted, and seven votes constituted more than a majority of the quorum, Carload argues the vote was valid.[4] Thus, Carload asserts the 7-3 vote was effective to award the operating agreement, where all 16 members were in attendance, but six abstained.

         The Authority contends Carload is bound by the Authority's advance announcement that nine affirmative votes would be required to award the operating agreement. The Authority did not amend its RFP or its bylaws regarding voting. However, the RFP contained a general reservation of rights, on which the Authority relies as empowering it to depart from the normal voting requirements. The Authority further asserts Carload is estopped from protesting the nine-vote requirement because it did not do so at the time the Authority announced it.

         Without regard to whether the challenged vote was valid or invalid, Carload argues that as the high scorer in the evaluation process, it is entitled to be awarded the operating agreement in accordance with the criteria and award process provided by the Authority in its RFP. The Authority, again in reliance on its general reservation of rights in the RFP, insists it has no obligation to award the operating agreement.

         III. Discussion

         A. Majority Vote of Those ...


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