from the Order Entered September 25, 2018 In the Court of
Common Pleas of Lehigh County Civil Division at No(s):
BEFORE: SHOGAN, J., NICHOLS, J., and STRASSBURGER [*] , J.
the City of Allentown ("the City"), appeals from
the order entered in the Court of Common Pleas of Lehigh
County on September 25, 2018, denying its motion for a
preliminary injunction against Appellee, Lehigh County
Authority ("LCA"). We affirm.
trial court summarized the factual history of this case as
On May 1, 2013, the parties entered into the Allentown Water
and Sewer Utility System Concession and Lease Agreement
[("the Agreement"). The Agreement contains specific
obligations for ensuring that LCA maintains the water and
sewer utility systems it was leasing for a fifty-year time
period. The Agreement also contains express provisions
limiting the extent to which water and sewer bills sent to
City residents can be increased by LCA. Specifically, Article
7 of the Agreement generally governs the imposition of
Service Charges on City residents, and the amount by which
those service charges can be increased on an annual basis.
Section 7.1(d) of the Agreement provides for the
"Initial Schedule of Rates" and substantially
restricted LCA from revising that Schedule without the prior
approval of the City prior to January 2016. Accompanying [the
Agreement] was a set of schedules. Schedule Three details the
various service charges imposed as of 2016 for water and
sewer service based upon the size of the piping serving a
particular address. By and large, any customer with a pipe
size from 5/8" to one inch is a residential ratepayer,
while those addresses with wider pipe sizes are almost
uniformly commercial customers.
In addition, the Schedule listed the service charges, or
rates, to be imposed on residential and commercial customers
based on billing cycles. Residential customers were billed on
a quarterly basis, while commercial customers were billed on
a monthly cycle. This was the billing cycle pattern used by
the City when it operated the water and sewer systems.
Respondent LCA continued this billing cycle practice when it
took over the operation of the systems even though the
express terms of [the Agreement] do not compel the
continuation of the quarterly billing cycle for residential
After the commencement of [the Agreement] in 2013, LCA
determined that approximately 750 residential and commercial
customers were being billed on the incorrect billing cycle,
i.e., some residential customers were billed monthly and some
commercial customers were billed quarterly. However, LCA
notified the City it intended to correct, or "true
up," this anomaly. The City understood this correction
occurred by 2016.
Beginning in 2016, the Agreement permitted LCA to increase
rates on City customers subject to specific limitations. In
particular, Section 7.1(e) restricted LCA to increasing rates
only once per calendar year. That subsection also provides
that for each calendar year beginning in 2016, LCA may
increase the Service Charges billed for each class or type
of Utility Service, but any increase in service charges may
not exceed the Permitted Annual Rate Adjustment.
The "Permitted Annual Rate Adjustment" is based on
the "Schedule of Service Charges" in effect for the
prior year multiplied by the combined sums of the "Index
Change" for the calendar year, and a fixed rate
multiplier referred to as the "Margin Change." The
"Index Change" generally corresponds to any
increase in the Consumer Price Index for Urban Consumers
-Northeast Region as compiled by the U.S. Department of
Labor, Bureau of Labor Statistics. According to the terms of
[the Agreement], the "Margin Change" from 2016 -
2032 is 2.5% per year. That rate falls to 2.0% per year from
2033 until the expiration of the lease agreement.
As of November 13, 2017, LCA published its proposed rates for
water and sewer service for both residential and commercial
customers effective January 1, 2018. The rates were quoted in
both monthly and quarterly billing rates for both types of
consumers. Until 2016, LCA had not published a schedule of
new rates listing both monthly and quarterly billed amounts
for each class of customers. For both 2017 and 2018, the
published rates indicated what the billed amounts would be
for both residential and commercial customers on both a
monthly and a quarterly billing cycle. Despite these two
types of rates being included in the schedules published in
2017 and 2018 for implementation the following year, LCA
continued the past practice of billing Small Meter Customers
on a quarterly basis, and Large Meter Customers on a monthly
[The City] does not dispute that the 2017 rate schedule fell
within the permitted renewal rate adjustment, using the 2016
rates as the base figure. As was testified to at the hearing
on the motion for the preliminary injunction, the Index
Change for 2016 was 0.8% for that year, meaning the annual
rate adjustment for 2017 was only 3.3% (0.8% Index Change
2.5% Margin Change). For calendar year 2018, the Index Change
from 2017 was 1.5%. When added to the fixed multiplier of
2.5%, the permitted annual rate adjustment as published for
2018 was 4.0%.
However, on May 21, 2018, the LCA board unanimously approved
a resolution to convert from a quarterly billing schedule to
a monthly billing schedule for Small Meter Customers,
effective August 1, 2018. Based on the resolution approved by
the LCA Board, the amount paid annually by residential
customers as of August 1, 2018 would jump from $150 up to
$311, an increase of 107%. [The City] argues this level of
rate adjustment is well beyond the permitted annual rate
change under the terms of [the Agreement]. Additionally, [the
City] asserts that such a midyear rate adjustment violates
the terms of Article 7.1(e).
Court Opinion, 9/25/18, at 2-5 (internal citations omitted).
City filed a complaint on July 10, 2018, and a motion for
preliminary injunction on July 16, 2018. LCA filed an answer
to the complaint on August 2, 2018, and an answer to the
motion for preliminary injunction on August 6, 2018. The
trial court held an evidentiary hearing on the motion for
preliminary injunction on September 4, 2018. On September 25,
2018, the trial court issued an order and opinion denying the
motion for preliminary injunction. The City filed a notice of
appeal on October 24, 2018. The City and the trial court
complied with Pa.R.A.P. 1925.
City presents the following issues for our review on appeal:
1. Whether the [t]rial [c]ourt committed reversible error in
concluding that the City of Allentown, which was a party to
the contract, did not have standing to bring the lawsuit
against Lehigh County Authority ("LCA") for breach
2. Whether the [t]rial [c]ourt committed reversible error in
concluding that implementation of monthly billing would not
immediately and irreparably harm the City and its residents.
3. Whether the [t]rial [c]ourt committed reversible error in
concluding that the City did not provide evidence that a
greater injury would be suffered by the City if injunctive
relief was denied.
4. Whether the [t]rial [c]ourt committed reversible error in
concluding that the City has not demonstrated that granting
injunctive relief would serve the public interest.
5. Whether the [t]rial [c]ourt committed reversible error in
concluding that any claim by the City would be premature
until the ...