Federal judge rules PhilaPort enjoys sovereign immunity in dismissing $45 million lawsuit

By Karen Kidd | Nov 21, 2018

A tugboat guides a container barge on the Delaware River at the Port of Philadelphia   FreeImages

PHILADELPHIA — A federal judge has thrown out a New Jersey contractor's breach-of-contract lawsuit against Philadelphia Regional Port Authority (PhilaPort) over a cancelled $45 million contract, saying the port authority enjoys sovereign immunity.

"Defendant PhilaPort enjoys sovereign immunity under the Eleventh Amendment and the Court thus lacks subject-matter jurisdiction over the case," U.S. District Court Judge Jan Ely DuBois, on the bench in Pennsylvania's Eastern District, said in his 13-page memorandum and order issued Nov. 9.

DuBois dismissed with prejudice Richard E. Pierson Construction Co.'s lawsuit against the port authority following a telephone conference on Nov. 2.

Richard E. Pierson Construction, based in Pilesgrove, New Jersey, alleged the PhilaPort's facilities management breached its duty of good faith and fair dealings and cause the construction company to suffer immediate and irreparable harm. The construction company claimed loss of business opportunity and profits after PhilaPort cancelled the contract awarded earlier to Richard E. Pierson Construction as low bidder over a bid protest from the second-lowest bidder, South State Inc.

In his memorandum, DuBois said Richard E. Pierson Construction mischaracterized an earlier Eastern District case, U.S. ex rel. Budike v. PECO Energy decided in 2013, which weighed in on sovereign immunity. DuBois also cited two U.S. Court of Appeals for the Third Circuit cases, Benn v First Judicial District of Pennsylvania decided in 2005 and and Karns v Shanahan et. al. this past January, to bolster his reasoning behind his memorandum and order.

DuBois also applied the three "Fitchik Factors" test, laid down by the Third Circuit in Fitchik v. New Jersey Transit Rail Operations Inc. in 1989, used to determine whether a governmental entity is of the state under federal law. The Fitchik factors determine liability for the state for judgment, a defendant's status under state law and a defendant's autonomy.

"The Court has concluded that the first factor disfavors sovereign immunity and the second and third factors slightly favor immunity," Judge DuBois said in his memorandum. "Weighing the qualitative strength of each individual factor in the unique factual circumstances at issue, the Court agrees with Budike and concludes that the Fitchik factors favor sovereign immunity," the memorandum said.

Richard E. Pierson Construction argued that the Eastern District misinterpreted in Budike the analytical framework that the Third Circuit articulated in Benn and urged the factors be weighed rather than counted.

"According to plaintiff, because the first factor weighs strongly against sovereign immunity and the second and third factors weigh only slightly in favor of sovereign immunity, the factors, when balanced, still weigh against sovereign immunity," the memorandum said.

DuBois rejected that argument.

"For this Court to conclude that PhilaPort does not enjoy sovereign immunity would be to ignore Benn and conclude that the evidence supporting the first factor -- the disclaimer of PhilaPort's debts by the Commonwealth -- by itself is determinative," the memorandum said. "The Court rejects that reading of Third Circuit precedent. Although this conclusion may result in limited and unsatisfying avenues to obtain relief for plaintiff, state sovereignty is a constitutional precept and lynch pin of our federalist system of government."

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