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Wayne Moving & Storage of New Jersey, Inc. v. School District of Philadelphia

October 28, 2010

WAYNE MOVING & STORAGE OF NEW JERSEY, INC.
v.
THE SCHOOL DISTRICT OF PHILADELPHIA; THE SCHOOL REFORM COMMISSION, APPELLANTS



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-06-cv-00676) District Judge: Honorable Lawrence F. Stengel

The opinion of the court was delivered by: Fisher, Circuit Judge.

PRECEDENTIAL

Argued September 14, 2010

Before: SLOVITER, FISHER and GARTH, Circuit Judges.

OPINION OF THE COURT

This diversity action requires us to decide under Pennsylvania law whether a subcontractor may recover against a school district for a claim of unjust enrichment. The case involves a dispute over unpaid services between the subcontractor Wayne Moving & Storage of New Jersey ("Wayne Moving") and the appellants the School District of Philadelphia and the School Reform Commission (collectively, "School District"). Wayne Moving sued the School District under a theory of unjust enrichment for unpaid moving services. The United States District Court for the Eastern District of Pennsylvania granted Wayne Moving‟s motion for summary judgment and awarded it $830,071.18 plus interest. On appeal, the School District contends that Wayne Moving‟s claim of unjust enrichment is barred by Section 508 of the Pennsylvania Public School Code, which applies to "contracts of any kind." 24 Pa. Stat. Ann. § 5-508. Appellants maintain that "contracts of any kind" include those contracts implied by courts in unjust enrichment claims. We agree and hold that those acts of the School District not in compliance with the provisions of Section 508 are rendered "void and unenforceable," id., and cannot bind the School District under an implied contract of unjust enrichment. We further hold that the School District is not equitably estopped from relying on Section 508.

For the following reasons, we conclude that the District Court‟s denial of the School District‟s motion for summary judgment was in error. Accordingly, we will reverse the District Court‟s grant of summary judgment in favor of Wayne Moving and remand for entry of summary judgment for the School District.

I.

A.

Wayne Moving subcontracted with Facility Strategies, a professional relocation consultant, to provide moving services for the School District. The moving project dates back to 2002 when Frank Siefert, the Special Assistant to the Commission, suggested consolidating the School District‟s five administrative office buildings into one central location. On August 13, 2002, the School Reform Commission approved the purchase of 440 North Broad Street to serve as the new School District headquarters. On June 16, 2004, the Commission authorized the School District to enter into a contract for moving services in an amount not to exceed $1.4 million.

Facility Strategies and Wayne Moving submitted a proposal for just under the $1.4 million authorized amount. On September 1, 2004, Facility Strategies entered into a subcontract agreement with Wayne Moving for an amount not to exceed $840,115.68, and on September 24, 2004, Facility Strategies and the School District entered into a contract for an amount not to exceed $1,396,865.68.

The move into 440 North Broad Street encountered numerous difficulties involving non-functioning elevators, unanticipated work, and delays due to the School District‟s disputes with a third party. The move was scheduled to begin in January of 2005, and Facility Strategies and Wayne Moving contracted to complete the move by September 30, 2005. But it did not begin until April 2005 and most of the moving occurred in the final month before the deadline.

As a result of the delays, the project incurred additional expenses. Sallyann Ferullo, President of Facility Strategies, inquired of Frank Siefert at the School District as to what should be done about the additional expenses. Siefert told her, according to Ferullo‟s testimony, "[D]on‟t worry, just document it. As long as we have documentation we‟ll take care of it at the end." Wayne Moving & Storage of N.J. v. School Dist. of Phila., No. 06-0676, 2008 WL 65611, at *1 (E.D. Pa. Jan. 3, 2008). Ferullo then inquired as to whether Facility Strategies and Wayne Moving should stop working. Siefert, according to Ferullo‟s testimony, responded, "Oh no. . . . You got to finish. We got to finish." Id. Ferullo stated that she would "get it done. Whatever it takes." Id.

Two invoices and an extra work order are at issue. Ferullo submitted an extra work order to the School District on September 20, 2005 for $384,100. Siefert approved the extra work order and, according to the School District, was under the impression that: the project was still within the $1.4 million budget; the work order only included cost estimates; and the order was approved only on a not-to-exceed basis. The District Court did not find otherwise. Id. at *8.

Facility Strategies submitted an invoice on October 26, 2005 for part of the work performed in September. In a cover letter, Ferullo informed Siefert that Facility Strategies received additional invoices from Wayne Moving and that the project was over the contracted amount by $158,000. Ferullo also stated that she had yet to receive invoices from the last week of September, "the most intensive week of work." Id. at *2. She went on to note that "[o]nce all of the invoices have been received, it is my understanding that you will need to go before the [School Reform Commission] for the additional funding." Id. But Ferullo expressed confidence that the remaining expenses "will come within the projections that we discussed in the itemized Extra Work Order." Id. The School District paid Facility Strategies after receiving the invoice, and Facility Strategies subsequently paid Wayne Moving the full $840,116 contracted amount.

Facility Strategies submitted a final invoice to the School District on December 20, 2005 for $834,201.18, which included $830,071.18 for the extra work performed by Wayne Moving. Wayne Moving argued that the additional expenses were due to the expanded scope of work and unanticipated impediments. The District Court agreed and found that the "$830,071.00 in extra work was attributed to the compressed schedule, inoperable or inadequate elevators, and an increased scope of the work to be performed." Wayne Moving & Storage of N.J. v. School Dist. of Phila., No. 06-0676, 2009 WL 123781, at *1 (E.D. Pa. Jan. 14, 2009). Regardless, the School District refused to pay because the claimed amount was in excess of the $1.4 million authorized by the School Reform Commission.

Wayne Moving did not submit additional written demands for payment, nor did it file suit against Facility Strategies. Wayne Moving, however, did ...


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