Municipalities Authorities Act: What is a “majority” needed to take action?

Seda-Cog Joint Rail Authority v. Carload Express, Inc., 185 A.3d 1232 (Pa. Cmwlth. 2018), allocatur granted Jan. 23, 2019, appeal docket 12 MAP 2019

Seda-Cog Joint Rail Authority, which owns and maintains rail lines in several Pennsylvania counties, contracts with a private railroad operator to provide the actual freight services on the rail lines. When the incumbent operator Susquehanna was nearing the end to its contract, Seda-Cog put the contract out for bid.  The Authority narrowed the field to three applicants including Susquehanna and then scored the three on various criteria. Carload received the highest score, but its selection still required a vote of the Authority members.

The Authority has 16 directors, 6 of whom announced they would not be voting because of business relationships with the bidders.  All bidders understood throughout the selection process that only 10 of the 16 directors would vote. 

Pursuant to the Municipalities Authorities Act, 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. Although not contained in the RFP or an amendment to the RFP or an amendment to the bylaws, the Authority decided during the selection process and informed all bidders that it would require the affirmative vote of 9 members to award the new contract.  That is, the Authority decided that it would define the majority based on 16 members, even though 6 members would not be voting, rather than the 6 members that would constitute a majority of the members planning to vote.  No bidder objected. Given these circumstances, the legal issue presented is the meaning of “majority” and thus what number of affirmative votes are needed to select the new operator. Carload, the high point scorer, received 7 of the 10 votes, falling short of the “majority” the Authority said it required.  When the Authority decided that no new operating agreement would be awarded, Carload protested, and the Authority filed a declaratory judgment action with the Court of Common Pleas of Clinton County (trial court) to resolve the uncertainty.  The trial court granted summary judgment for the Authority, and Carload appealed to the Commonwealth Court.

In reversing the trial court and directing that the trial court enter judgment for Carload, the Commonwealth Court concluded that “majority” on these facts means 6 votes of the 10.  The court started with the common law rule, examined the Act to see if it changed the common law rule, examined the scant precedent on the issue, and concluded that the common law rule has not been altered by the Act.  The common law rule is that, assuming a quorum, which was not at issue here, a “majority” is the majority of those present and voting – here, 6 members, not 9.  The Act, however, provides that an authority may take action upon the vote of a majority of members “present” at a meeting unless the bylaws provide otherwise and the Authority’s bylaws do not vary the provision of the Act. 

The court turned to principles of statutory construction. For statutes enacted before 1937, if the statute is in derogation of common law, it is to be construed strictly; the strict construction rule applicable to provisions in derogation of common law does not apply if the statute was enacted after 1936.  However, although the Municipalities Authorities Act was enacted after 1936, it is a substantial reenactment of its predecessor statute enacted in 1935, and 1 Pa. C.S. §1962 provides that in such situations the reenacted statute is to be construed as if it were the original statute.

Accordingly, the court subjected the Act to strict construction in its use of the word “present” rather than the common law “present and voting.”  After reviewing the few precedents involving other statutes, the court concluded that the word “present” in the Act must be construed as “present and voting.”  The court found the result to be logical, explaining:

If the Act’s language supplanted the common law, it would ironically allow the abstaining members to control the outcome of the vote by choosing to abstain. Such a result is absurd. … Assuming the Act’s language was in derogation of the common law, such an outcome would also be inconsistent with the requisite strict construction of the statutory language (presumed to follow the common law).

Slip Op. at 10.

The Supreme Court has granted the Authority’s petition for allowance of appeal.  The issues, as stated by the Authority, are:

(1) Did the Panel err by disregarding the plain language of the Municipality Authorities Act (“MAA”), 53 Pa.C.S. § 5610(e) which expressly requires a vote by the majority of “members present” for an authority to take action, instead applying a common law quorum rule that has never applied to MAA authorities or to discretionary contracting processes, effectively superimposing the words “and voting” into the statute?

(2) Did the Panel err by ignoring this Supreme Court’s elimination of any presumption in favor of the common law voting rule for representative bodies of limited membership as well as operative provisions of the Statutory Construction Act (“SCA”), on the basis that the MAA was a pre-1937 enactment, where no applicable jurisprudence supports applying the common law rule to MAA authorities or discretionary procurement processes?

(3) Did the Panel apply an incorrect standard of review and improperly subvert the discretion of [the] JRA and its individual public official board members by superimposing a different voting standard than that chosen by [the] JRA for its discretionary procurement process, which tracks the language of 53 Pa.C.S. § 5610(e)[,] and by ignoring the affirmative provisions of the RFP and the voting standard announcement?