Five Star Parking v. Philadelphia Parking Authority

Citations: 662 F. Supp. 1053; 1986 U.S. Dist. LEXIS 19158Docket: Civ. A. 86-1005

Court: District Court, E.D. Pennsylvania; October 14, 1986; Federal District Court

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Five Star Parking, a joint venture of five California corporations, operated a parking facility at Philadelphia International Airport under a license agreement with the Philadelphia Parking Authority from September 1982 to February 1986. The agreement required Five Star to maintain a $500,000 irrevocable letter of credit to secure its operations. A dispute emerged in late 1985 regarding the accurate collection and remittance of parking revenues by Five Star employees. In December 1985, the Authority drew down the letter of credit without notifying Five Star. Subsequently, reports surfaced in January 1986 about potential revenue shortages linked to Five Star, prompting the Authority to take custody of Five Star's books and records in February 1986.

In response, Five Star filed a diversity action seeking an injunction for access to its records and claiming that the Authority's actions constituted a breach of the license agreement, warranting the return of the $500,000. Five Star also alleged defamation due to the news stories, which it attributed to the Authority, and sought damages. An amended complaint expanded the defamation claims into three counts. The Authority moved to dismiss the complaint on Eleventh Amendment grounds and for failure to state a claim regarding the breach of contract and tort claims, citing Pennsylvania's Political Subdivision Tort Claims Act.

On March 7, 1986, the court denied the Authority's Eleventh Amendment motion, concluding that the Authority did not partake of the Commonwealth's sovereignty. The court also treated the dismissal motion regarding the contract claim as a summary judgment motion and denied it. After failed negotiations between the parties, the court allowed Five Star additional discovery time before ruling on the tort counts. In July 1986, Five Star filed a second amended complaint narrowing its claims to four remaining counts.

Count one alleges that the Authority breached the license agreement by drawing down a letter of credit. Count two claims that false January news stories caused Five Star to lose bids for operating parking facilities at new developments in Philadelphia. Count three reasserts the defamation claim based on the press accounts, while count four continues with the defamation allegations and introduces a wrongful seizure of the parking facility, claiming these actions constituted "willful, wanton, vindictive, unprivileged and outrageous interference" with Five Star's business relationships. The Authority seeks dismissal of the contract claim for lack of a viable argument and the tort claims due to immunity under Pennsylvania's Political Subdivision Tort Claims Act.

The critical issues in count one include whether the license agreement allowed the Authority to draw down the letter of credit based solely on its notification to the Bank of America about Five Star's alleged non-performance, and if so, whether the Authority had reasonable grounds for believing Five Star had breached the agreement. These questions hinge on factual determinations that cannot be resolved through summary judgment as material issues remain.

The Philadelphia Parking Authority is classified as a "local agency" under the Political Subdivision Tort Claims Act, thereby enjoying governmental immunity. The Act lists specific exceptions to this immunity, none of which include defamation or interference with business claims, as alleged in counts two, three, and four. Five Star argues that the Authority's parking operations are unauthorized and therefore not entitled to immunity, based on the assertion that profits are returned to the City of Philadelphia rather than merely covering operational costs, as intended by the Pennsylvania Legislature. The Authority counters that revenue should not be confused with profit. The complexity of determining the Authority's profitability and the implications of its revenue model lead to a focus on whether the claim of immunity can be contested based on these factors. The discussion references the precedent set in Hill v. Allentown Housing Authority regarding local agency liability and negligence.

The Authority operated Hannover Acres, a housing unit, and maintained an inadequately fenced dump adjacent to it, located in an abandoned quarry pit. This dump contained various types of rubbish, including inflammable materials, leading to frequent fires and posing risks to tenant children who played nearby. A 7-year-old plaintiff suffered severe burns while searching for junk in the dump. In a lawsuit brought by his father, the court awarded $18,000 to the father and $30,000 to the minor son. Chief Justice Stern ruled that the Authority's maintenance of the dump did not constitute a governmental function, which negated its claim of immunity. The Housing Authorities Law of 1937 aimed to provide safe housing for low-income individuals but did not require the Authority to maintain municipal facilities like the dump, which was deemed a mere convenience rather than a necessity. The ruling referenced the Pennsylvania Supreme Court case involving the Philadelphia Parking Authority, asserting that the Political Subdivision Tort Claims Act limits immunity to authorized acts, implying that the Authority's operation of the dump was unauthorized and thus liable. The analysis critiqued by Five Star highlighted that the previous case did not differentiate between authorized and unauthorized governmental actions; instead, it focused on the dump's necessity in fulfilling the housing mandate.

The document establishes that housing authorities can provide 'ordinary municipal facilities' to their tenants, either directly or through arrangements with other municipalities, without automatically extending tort immunity to all activities they undertake. Chief Justice Stern noted a key legal principle distinguishing between governmental functions, which enjoy immunity from liability, and proprietary functions, which do not. The challenge arises in categorizing specific activities as either governmental or proprietary. The case of Hill exemplified this difficulty, as it involved activities that were authorized but not necessary for legislative mandates. Furthermore, the evolution of governmental immunity is traced from the judicial refinements seen in Hill to the landmark decision in Ayala v. Philadelphia Board of Education, which marked the decline of judge-created immunity doctrines. Justice Roberts criticized the governmental/proprietary function distinction as inadequate and confusing. Following Ayala, the Pennsylvania Legislature enacted the Political Subdivision Tort Claims Act to restore some governmental immunity. The document concludes that the Pennsylvania Supreme Court is unlikely to alter legislative immunity formulations as it had with judicial doctrines, emphasizing the distinction between judicially created doctrines and legislative acts.

Adding the term 'authorized' to the Political Subdivision Tort Claims Act would significantly alter its application, suggesting that courts would need to determine if a governmental agency acted ultra vires when defending against claims of governmental immunity. This raises questions about the legislative intent behind such a distinction, as it conflicts with standard tort liability principles. The Pennsylvania Supreme Court might infer that the Legislature intended to avoid these distinctions in the context of governmental immunity.

Five Star's argument challenges the Authority's actions as not 'authorized,' particularly regarding its profit-making activities, which could extend to defamation or interference claims. This perspective risks diluting the Act's protections and complicating future tort claims against governmental agencies. Furthermore, Five Star contends that the Authority should be liable since it can manage risks like private entities, which could lead to an unfair competitive advantage if it remains immune for its profit-driven activities. However, the assertion that the Authority's immunity undermines the Act's purpose is questioned, particularly given the unpredictability of risk management in certain areas.

Ultimately, the argument rests on the premise that if the Authority operated at a break-even point instead of making profits, it could negatively impact its competitors more than its current immunity does, suggesting that the current competitive landscape may not be as unfair as Five Star claims.

Five Star argues that the Political Subdivision Tort Claims Act unfairly grants immunity to the Authority when it operates a private business, while its private competitors do not enjoy similar immunity, thus violating the Fourteenth Amendment's equal protection clause. The company cites two state court rulings that highlight the irrationality of providing immunity to one governmental entity over another when their functions appear identical to injured plaintiffs. However, the court finds these precedents irrelevant, emphasizing that the distinction is between private conduct and government conduct, which has long been recognized in Anglo-American law. The law may impose different standards on governments versus private entities. The court ultimately denies the defendant's motion to dismiss concerning count one of the second amended complaint but grants it concerning counts two, three, and four. Additionally, the court notes that a request for injunctive relief is moot due to prior agreements between the parties, and it dismisses the Authority's claims regarding the erosion of precedent by a specific case and its assertion of sovereign immunity, clarifying that the Authority possesses governmental immunity under state law. The court also acknowledges that the license agreement governs the case and identifies a question regarding the good faith of the defendant's assertion of default related to a letter of credit.

The defendant contends that there is a misinterpretation of letters from Mr. Bowser and Mr. Crumlish, asserting that these letters indicate the defendant believed the licensee was in default as of December, which influenced their actions to resolve the issue. The complexity of the situation necessitates careful analysis of the documents and consideration of probabilities, indicating that material factual issues remain unresolved. Consequently, summary judgment on Count 1 is deemed inappropriate.

The excerpt further addresses exceptions related to vehicle liability and various aspects of governmental and sovereign immunity under Pennsylvania law. It distinguishes between these forms of immunity, noting that sovereign immunity, derived from Article I, section 11 of the Pennsylvania Constitution, cannot be abrogated solely by judicial action. The Pennsylvania Supreme Court has determined that the Philadelphia Parking Authority is not considered the Commonwealth for Eleventh Amendment purposes, thus not protected from this lawsuit.

Additionally, it questions whether the Authority's conduct is unauthorized, clarifying that while the Authority is indeed authorized to operate parking facilities, the dispute centers on the rate structure, which may be contestable in equity if a proper plaintiff exists. The standing of taxpayers or parking patrons in such disputes is raised. The excerpt also references various legal challenges regarding equal protection and access to courts under Pennsylvania law, noting that similar challenges have been consistently rejected by the courts.