IN THE COMMONWEALTH COURT OF PENNSYLVANIA Robert Lee, Jr., Administrator of the : Estate of Robert Lee, Sr., Deceased : : v. : No. 2192 C.D. 2012 : Argued: April 16, 2013 Beaver County d/b/a Friendship Ridge : Nursing & Rehabilitation and Friendship : Ridge Nursing & Rehabilitation and : Premier Healthcare Resources, Inc., a : Pennsylvania Corporation, d/b/a Friendship : Ridge Nursing & Rehabilitation : : Petition of: Beaver County d/b/a Friendship : Ridge Nursing & Rehabilitation, and : Friendship Ridge Nursing & Rehabilitation : BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY SENIOR JUDGE COLINS FILED: July 15, 2013 On January 4, 2013, this Court granted permission for Beaver County d/b/a Friendship Ridge Nursing & Rehabilitation and Friendship Ridge Nursing & Rehabilitation (collectively the County) to bring an interlocutory appeal of the Beaver County Court of Common Pleas (Trial Court) November 14, 2012 amended order overruling the County s preliminary objections and certifying that a controlling question of law exists on which there is substantial grounds for a
difference of opinion that provide a basis for immediate appeal. See Pa. R.A.P. No. 1311; 42 Pa. C.S. 702(b). The County owns and operates a skilled nursing facility that Appellee Premier Healthcare Resources, Inc., a Pennsylvania Corporation, d/b/a/ Friendship Ridge Nursing & Rehabilitation (collectively Premier) provides management services to pursuant to a written Management Agreement. Both the County and Premier were named as defendants in a civil action complaint that alleged that a resident-patient of the skilled nursing facility received negligent medical care. The County filed an answer and new matter to the complaint asserting, inter alia, the affirmative defense of governmental immunity and then moved for judgment on the pleadings. Premier filed cross-claims against the County, alleging that Paragraph 10(b) of the Management Agreement obligated the County to indemnify and defend Premier. The County responded to Premier s cross-claims with preliminary objections, arguing that governmental immunity shielded the County from Premier s contract claims, just as it did from the underlying medical negligence claims. On May 23, 2012, the Trial Court granted the County s motion for judgment on the pleadings and dismissed the direct tort claims against the County in the underlying civil action, concluding that governmental immunity shielded the County from claims for medical negligence. On October 4, 2012, the Trial Court overruled the County s preliminary objections against Premier s cross-claims without opinion. The County then sought to certify the issue for an interlocutory appeal by permission, which was granted by the Trial Court on November 1, 2012 and certified to this Court in an amended order on November 14, 2012. 2
Court as follows: The issue before this Court for review has been framed by the Trial Whether governmental immunity, provided for in the Political Subdivision Tort Claims Act[ 1 ], may be contractually waived via a Management Agreement between Beaver County and Premier Healthcare Resources, Inc., which provided in Paragraph 10(b) as follows: County agrees to indemnify, defend, and save PHR, its successors and assigns, agents, employees, board members and affiliates (each, a PHR Indemnitee ), harmless from any and all judgments, orders, decrees, awards, costs, expenses, damages, including attorneys fees and claims, incurred by or asserted against any PHR Indemnitee (the PHR Damages ) which any such PHR Indemnitee may sustain or incur as a result of (i) any negligence, act or omission of the County, its employees, agents, contractors or subcontractors, or (ii) County s breach of any representation, warranties or covenants contained in this Agreement. and the application of McShea v. City of Philadelphia, 606 Pa. 88, 995 A.2d 334 (2010), to the instant case. (Trial Court Amended Order November 14, 2012.) Essentially, the issue is whether the cross-claims brought by Premier against the County are legally sufficient. For the reasons that follow, we hold that they are not. 2 1 Act of November 26, 1978, P.L. 1399, as amended, formerly 53 P.S. 5311.101-5311.803, repealed by the Act of October 5, 1980, P.L. 693, recodified in the Judicial Code, as amended, 42 Pa. C.S. 8541 8542. The Act will hereafter be referred to as the Tort Claims Act. 2 Our standard of review is de novo and our scope of review is plenary; in reviewing a trial court s decision on preliminary objections, we accept as true all well-pleaded material facts, and will sustain preliminary objections only where they are clear and free from doubt. Petty v. Hospital Service Association of Northeastern Pennsylvania, 967 A.2d 439, 443 n.7 (Pa. Cmwlth. 2009). 3
In McShea, a class of current and former City of Philadelphia employees, who had participated in a voluntary deferred compensation plan from 1987 to 1994, brought suit alleging that the City had mismanaged the plan, and that this mismanagement had cost the plan 3.5 million dollars. 606 Pa. at 91-92, 995 A.2d at 336-337. The City filed preliminary objections to Count III of the plaintiffs complaint, asserting that the claim was barred by governmental immunity and that, despite contractual language suggesting the City had agreed to waive immunity, the Tort Claims Act deprived the City of authority to waive its immunity from tort liability. 606 Pa. at 93, 995 A.2d at 337. The plaintiffs argued that the claim alleged in Count III sounded in contract, not tort, and that the City did not have immunity from claims that sounded in contract. 606 Pa. at 95, 995 A.2d at 339. Following an examination of the McShea complaint, our Supreme Court concluded first that Count III lacked the essential elements of a contract action and instead sounded in tort. 3 606 Pa. at 97, 995 A.2d at 340. The Court next concluded that the plaintiffs claim did not fit within one of the exceptions to governmental immunity provided by Section 8542 of the Tort Claims Act and that, as a result, Count III of the plaintiffs complaint was barred by the General Assembly s grant of governmental immunity to political subdivisions. 606 Pa. at 99-100, 995 A.2d at 341. At the close of McShea, the Court stated that pursuant to [Section] 8541 s plain language, and this Court s precedent interpreting the 3 The Court identified the material facts necessary to state a contract action as: (1) the existence of a contract between plaintiff and defendant, (2) defendant s breach of a duty imposed by the contract, and (3) damages suffered by plaintiff resulting from defendant s breach. 606 Pa. at 97, 995 A.2d at 340. 4
legislature s clear intent to immunize political subdivisions from tort not contract liability, a political subdivision cannot waive tort immunity by contract. 606 Pa. at 100, 995 A.2d at 341. Before this Court, the County argues that the holding in McShea is controlling and clearly establishes that a political subdivision cannot waive governmental immunity by contract. Premier distinguishes McShea, arguing that the holding in McShea is limited to whether the claim at issue sounded in tort or contract, and that McShea does not address the liability of a political subdivision when the claim at issue sounds in contract. Premier argues that because its cross-claims seek to protect bargained for expectations, and do not seek redress for injury to persons or property, governmental immunity cannot shield the County from liability for its breach of the Management Agreement. In support, Premier contends that this Court should be guided by our Supreme Court s analysis of governmental immunity in Meyer v. Community College of Beaver County, 606 Pa. 539, 2 A.3d 499 (2010). In Meyer the Court held that governmental immunity does not extend to all statutory causes of action, regardless of whether they sound in tort or contract. 606 Pa. at 546, 2 A.3d at 503. In reaching this conclusion, the Court examined the language of the Tort Claims Act and reasoned that the Act pertains to conduct causing injury to persons or property, implicating the main policies underlying tort law, and that the focus of the language of the Tort Claims Act is distinct from the central focus of contract law, which is bargained for expectations. Meyer, 606 Pa. at 545, 2 A.3d at 502. While we agree that at first blush the cross-claims alleged in Premier s complaint appear to sound in contract, we disagree with Premier s 5
assertion that this is the beginning and end of the inquiry; the question is not simply whether the claims sound in tort or contract, but also whether a cause of action has been stated at all. In the majority of cases where the General Assembly has permissibly limited liability based on a defendant s status, the analysis of the claims required at the preliminary objection stage may well be minimal; however, with political subdivisions, an additional level of analysis is required, especially where, as here, the claims do not raise questions of tort or contract, but of tort and contract. The Pennsylvania Constitution neither prohibits nor grants constitutional immunity to the Commonwealth, but grants authority to the General Assembly to direct whether and in which cases the Commonwealth shall be immune. Pa. Const. art. I, 2 ( Suits may be brought against the Commonwealth in such manner and in such cases as the Legislature may by law direct ); Carroll v. County of York, 496 Pa. 363, 437 A.2d 394 (1981). Encompassed within this constitutional grant of authority to the General Assembly, and exclusive to that body, is the authority to confer immunity upon political subdivisions. Carroll, 496 Pa. at 367, 437 A.2d at 396 (quoting City of Pittsburgh v. Commonwealth of Pennsylvania, 468 Pa. 174, 179, 360 A.2d 607, 610 (1979) ( (m)unicipal corporations are agents of the state, invested with certain subordinate governmental functions for reasons of convenience and public policy. They are created, governed, and the extent of their powers are determined by the Legislature and subject to change, repeal or total abolition at its will. )); see also Mayle v. Pennsylvania Department of Highways, 479 Pa. 384, 388 A.2d 709 (1978) and Ayala v. Philadelphia Board of Public Education, 453 Pa. 584, 305 A.2d 877 (1973) (concluding that the presence or absence of sovereign immunity is a 6
legislative rather than constitutional issue and abrogating the judicial doctrines of governmental and sovereign immunity.) The General Assembly exercised its power to confer immunity upon political subdivisions when it enacted the Tort Claims Act. Section 8541 of the Tort Claims Act provides: Except as otherwise provided in this subchapter, no local agency shall be liable for any damages on account of any injury to a person or property caused by any act of the local agency or an employee thereof or any other person. 42 Pa. C.S. 8541. Section 8541 states an absolute rule of governmental immunity and its language reflects the expressed legislative intent to insulate political subdivisions from tort liability. Mascaro v. Youth Study Center, 514 Pa. 351, 361, 523 A.2d 1118, 1123 (1987). In City of Philadelphia v. Gray, 534 Pa. 467, 633 A.2d 1090 (1993), our Supreme Court made clear the scope of the General Assembly s exclusive authority to confer governmental immunity, when it held invalid a duly enacted ordinance that rendered the city liable for tort claims beyond the eight enumerated exceptions contained within Section 8542 of the Tort Claims Act. 4 The Court reasoned that the absolute rule provided by Section 8541 did not simply clothe political subdivisions with immunity, but established that the immunity conferred 4 Section 8542 of the Tort Claims Act provides a series of eight exceptions to immunity from tort for political subdivisions, or governmental immunity, including: (1) vehicle liability; (2) care, custody or control of personal property; (3) real property; (4) trees, traffic controls and street lighting; (5) utility service facilities; (6) streets; (7) sidewalks; and, (8) care, custody or control of animals. 42 Pa. C.S. 8542. The parties do not dispute that negligence premised on the provision of medical care is not listed as an exception to governmental immunity. 7
by the General Assembly is not waivable nor is it subject to any procedural devise that could render a governmental agency liable beyond the exceptions granted by the legislature. City of Philadelphia v. Gray, 534 Pa. at 475, 633 A.2d at 1093; see also Sims v. Silver-Springs-Martin Luther School, 625 A.2d 1297, 1302 (Pa. Cmwlth. 1993) (holding that the legislature never intended for a local agency to be held liable for tort damages under a contract theory). 5 What City of Philadelphia v. Gray makes clear, and McShea reiterates, is that it is not within the authority of the political subdivision to direct, no matter what the mechanism it seeks to employ, whether and in what instances it is shielded by governmental immunity; instead, the presence or absence of governmental immunity is solely the prerogative of the General Assembly. It is within this legal framework that the County and Premier executed the Management Agreement at issue here. Under Pennsylvania law, while reasonable people may agree that a political subdivision acted negligently in a particular instance, such a consensus would be confined to mere opinion and speculation, for a legally sufficient claim of negligence by a political subdivision simply does not exist beyond the eight enumerated exceptions provided by Section 8542 of the Tort Claims Act. The County agreed to indemnify and defend Premier 5 We note that, in support of its argument, Premier has relied upon Ludwin v. Port Authority Transit Transit Corp., 517 A.2d 1006 (Pa. Cmwlth. 1986) (en banc), in which this Court held that the terms of a lease between the city and the port authority were tantamount to a waiver of immunity by the city. This holding was premised on this Court s conclusion in an earlier decision that a political subdivision could waive immunity by ordinance, a conclusion unequivocally abrogated by our Supreme Court s decision in City of Philadelphia v. Gray. Ludwin lived for seven short years before City of Philadelphia v. Gray and yet in the thirty-years since we have been called upon to repeatedly stress that Ludwin is a hobbled vestige lacking validity; today, we do so again. See, e.g., Rodriguez v. City of Philadelphia, Department of Human Services, 657 A.2d 105, 108 (Pa. Cmwlth. 1995). 8
where Premier sustained or incurred damages as a result of negligence on the part of the County or its employees. No such negligence has been stated here, because, as both parties agree, the Tort Claims Act does not provide an exception to governmental immunity for medical malpractice. Had the underlying tort claim been premised on one of the eight exceptions enumerated in Section 8542, such as negligence arising from care, custody or control of personal property, we would be presented here with a very different case and one certainly informed by our Supreme Court s analysis in Meyer. However, as it stands, Premier has failed to allege either a valid tort claim or a valid contract claim. In McShea, the Supreme Court counseled that a plaintiff must allege that a defendant breached a duty imposed by a contract as a part of stating a valid contract claim. Cf. Peluso v. Kistner, 970 A.2d 530, 533-534, 534 n.7 (Pa. Cmwlth. 2009) (complaint dismissed where sovereign immunity did not act as a bar to claim premised on promissory estoppel, but plaintiff failed to state the essential elements of a promissory estoppel claim). Premier has instead alleged that the County breached a duty that the contract could not impose. In sum, because only the General Assembly can direct whether and in what instances governmental immunity can be waived by political subdivisions, the County could not waive governmental immunity in the Management Agreement it executed with Premier beyond the exceptions enumerated in the Tort Claims Act, and therefore, Premier has failed to state a contract claim, because it has failed to allege that the County breached a duty imposed by the Management Agreement. Accordingly, we reverse the order of the Trial Court and remand for further proceedings with directions that the Trial Court sustain the preliminary 9
objections in the nature of a demurrer brought by the County and dismiss Premier s cross-claims. JAMES GARDNER COLINS, Senior Judge 10
IN THE COMMONWEALTH COURT OF PENNSYLVANIA Robert Lee, Jr., Administrator of the : Estate of Robert Lee, Sr., Deceased : : v. : No. 2192 C.D. 2012 : Beaver County d/b/a Friendship Ridge : Nursing & Rehabilitation and Friendship : Ridge Nursing & Rehabilitation and : Premier Healthcare Resources, Inc., a : Pennsylvania Corporation, d/b/a Friendship : Ridge Nursing & Rehabilitation : : Petition of: Beaver County d/b/a Friendship : Ridge Nursing & Rehabilitation, and : Friendship Ridge Nursing & Rehabilitation : ORDER AND NOW, this 15 th day of July, 2013, the order of the Beaver County Court of Common Pleas (Trial Court) in the above-captioned matter denying the preliminary objections in the nature of a demurrer of Beaver County d/b/a Friendship Ridge Nursing & Rehabilitation and Friendship Ridge Nursing & Rehabilitation (collectively the County) to the cross-claims of Premier Healthcare Resources, Inc., a Pennsylvania Corporation, d/b/a/ Friendship Ridge Nursing & Rehabilitation (collectively Premier) is hereby REVERSED. The matter is REMANDED for further proceedings with directions that the Trial Court SUSTAIN the County s preliminary objections in the nature of a demurrer and DISMISS Premier s cross-claims. Jurisdiction relinquished. JAMES GARDNER COLINS, Senior Judge