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CONRAD O’BRIEN PC Attorneys for Plaintiff,
Kevin Dooley Kent (No. 85962) Chester Water Authority
Megan A. Guernsey (No. 202065)
Joseph W. Jesiolowski (No. 307323)
Andrew K. Garden (No. 314708)
Centre Square West Tower
1500 Market Street, Suite 3900
Philadelphia, PA 19102-2100
Phone: (215) 864-9600
Fax: (215) 864-9620
Email: kkent@conradobrien.com
jjesiolowski@conradobrien.com
mguernsey@conradobrien.com
agarden@conradobrien.com
IN THE COURT OF COMMON PLEAS OF DELAWARE COUNTY, PENNSYLVANIA
CIVIL ACTION —- LAW
CHESTER WATER AUTHORITY,
Plaintiff, No. CV-2020-2566
CITY OF CHESTER,
Defendant.
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CONRAD O’BRIEN PC Attorneys for Plaintiff,
Kevin Dooley Kent (No. 85962) Chester Water Authority
Megan A. Guernsey (No. 202065)
Joseph W. Jesiolowski (No. 307323)
Andrew K. Garden (No. 314708)
Centre Square West Tower
1500 Market Street, Suite 3900
Philadelphia, PA 19102-2100
Phone: (215) 864-9600
Fax: (215) 864-9620
Email: kkent@conradobrien.com
jjesiolowski@conradobrien.com
mguernsey@conradobrien.com
agarden@conradobrien.com
IN THE COURT OF COMMON PLEAS OF DELAWARE COUNTY, PENNSYLVANIA
CIVIL ACTION —- LAW
CHESTER WATER AUTHORITY,
Plaintiff, No. CV-2020-2566
CITY OF CHESTER,
Defendant.
AMENDED COMPLAINT
On February 3, 2020, the Court entered a stipulated order in the Trust Petition.
That stipulation broadly precluded the City of Chester from taking an array of actions against the
Chester Water Authority. Among other things, the City cannot interfere with, seize, or terminate
the Authority. The stipulation also contained a small carve-out stating that these restrictions did
not prevent the issuance of an “exploratory” request for proposals to attempt to ascertain the
value of the Authority. However, the stipulation did not ratify or otherwise sanction the RFP as
legal. It merely did not prohibit anyone from initiating a bid process. The stipulation was also
clear that although a bid process could be initiated, no attempted sale could close and the City is
prohibited from attempting to “terminate, sell, transfer, operate, dissolve, or dispose of the
Authority or its assets, including but not limited to any actions under 53 Pa. C.S. §§ 5607, 5619,
or 5622.” This was consistent with the other restrictions in the stipulation that were designed to
keep the Authority and its assets in place and undisturbed. Finally, stipulation also expressly
preserved the parties’ positions on the merits of the Trust Petition. For the Authority, that
position has always been clear: the City does not own and cannot unilaterally seize and sell the
Authority or its assets.
On February 12, 2020, the City issued its “exploratory” RFP via a resolution of
City Council. The Authority, in order to preserve its rights, re-submitted its $60 million
settlement offer the Authority had publicly made to the City in January 2019. The Authority’s
settlement offer is the only legal option for the City to accept in connection with obtaining any
money from the Authority or its assets, as the City has no legal right to otherwise unilaterally
sell, lease, or monetize the Authority or its assets. Responding to the RFP in this fashion is fully
consistent with, and never waived, the Authority’s position on the merits of the Trust
Proceeding.
The Authority now brings this Amended Complaint to (1) preserve its rights on
the merits and (2) get a Court declaration and injunction confirming that the City cannot ever
close on the February 12 RFP — as the City does not and cannot own the Authority’s assets — or
take any further unilateral action interfering with the Authority. This Amended Complaint is not
a retrenchment from the Authority’s stipulation. That stipulation did not prohibit the City from
issuing the RFP. The Authority does not contest the issuance of the February 12 RFP. But the
Authority does contest the City’s ability to close on the February 12 RFP. Therefore, this
Amended Ancillary Petition is an effort to make clear that the RFP can never be closed and
issuing an “exploratory” RFP is the farthest the City can ever go, as the City cannot actually sell
the Authority or its assets.
In one sense, this Amended Complaint is a placeholder until the Court makes a
merits ruling on the Trust Petition.
The reasons the City’s February 12 RFP fails are straightforward. First, the Court
can and should approve the Trust based purely on deference to the Authority’s Board, without
ever reaching the City’s claim to unilaterally control the Authority. Second, as the Court ruled
on April 24, 2020, the Municipality Authorities Act does not give the City the power to
unilaterally act against the Authority. Third, the Environmental Rights Amendment prohibits the
City from seizing and selling the public natural resources of the Authority for the City’s own
benefit. Fourth, even if the City had the unilateral power to act against the Authority — and it
does not — the February 12 RFP is invalid because it was issued by resolution, when an ordinance
was required.
The four main arguments in this Amended Complaint are not new. The Authority
has briefed them many times, most recently in motions for judgment on the pleadings in this
litigation and in the Amended Complaint in the related Sunshine Act litigation, No. 2019-5400.
This Amended Complaint is not an attempt to fully re-hash those arguments. Rather, this
Amended Complaint is meant to preclude any waiver argument.
In light of the Court’s prior ruling on the Authority’s first two Ancillary Petitions,
the Authority is filing this challenge as a new stand-alone matter in the Civil Division. The
Authority is also cross-filing a substantially identical version of this Amended Complaint as an
Amended Ancillary Petition in the Trust Proceeding. However, the Authority believes that the
issues raised here should be decided in the Orphan’s Court matter, where they most properly
belong. In the event that the Court’s ruling does not already cover the issues raised here, the
Court can order a response at that time
PARTIES.
Plaintiff Chester Water Authority is a municipal authority existing under the laws
of Pennsylvania, with its principal offices located at 415 Welsh Street, Chester, PA 19013. By
state law, the Authority is controlled by a nine-member board. The City of Chester, Chester
County, and Delaware County each appoint three members of the Authority’s board.
Defendant City of Chester is a third-class city incorporated and organized under
the laws of Pennsylvania with principal offices located at 1 East 4"" Street, Chester, PA, 19013.
Il. FACTUAL BACKGROUND.
A. The City states in each and every one of its audits that the Authority is not
City asset.
The City itself recognized, as it had to, in every one of its audited financial
statements that the Authority is a City asset.
For example, the City’s most recent audit, which covers 2016, states that the
Authority is nota “component unit” of the City and is therefore “excluded from the reporting
entity [the City].” City Audit for 2016, page 24.
This audit was issued on July 10, 2019 under the supervision, and with the
approval, of the current Mayor and City Council. (It is a blistering indictment of the City that it
took three years to prepare the 2016 audit, but further comment on that is beyond the purview of
this filing.)
https://emma.msrb.org/ER1281549-ER999684-ER1403098. pdf
An identical disclaimer — confirming that the Authority is a City asset — is in
every one of the City’s audits going back decades. Here are some examples:
2015 City Audit, page 25;
2014 City Audit, page 26;
2013 City Audit, page 26;
2012 City Audit, page 27;
2011 City Audit, page 27;
2003 City Audit, page 21, attached as Exhibit P.
These statements in the audits are the City’s own position, arrived at under the
supervision of the Act 47 coordinator. They are not merely the auditors’ position.
The City itself does not, has not, and cannot carry the Authority as an asset on the
City’s books. The City, under the supervision of the Act 47 coordinator, provided that
underlying financial information to the auditors, who then incorporated it into the audited
financial statements.
Then the City explicitly endorsed and approved the audited financial statements,
each containing such a disclaimer.
https://emma.msrb.org/ES 1 152642-ES901384-ES 1302598. pdf
https://emma.msrb.org/ES1211441.pdf
https://emma.msrb.org/ES 1211458. pdf
https://emma.msrb.org/ES1211462.pdf
https://emma.msrb.org/ES 1211793 .pdf
The City cannot claim in every single one of its audited financial statements going
back decades that the Authority is a City asset, and then suddenly reverse course and now
claim it owns the Authority.
Again, and again, and again, the City went out of its way to explicitly say that the
Authority is a City asset. Ifthe City ever really thought it owned the Authority, the City
would have carried that enormously valuable asset on its books. The City did not, because it
does not own the Authority, as confirmed by the City’s auditors.
Indeed, if the Authority was an asset of the City, it would mean that all of the
City’s financial statements are fraudulent and false for leaving the Authority, a nine-figure asset,
completely off the City’s books for decades. Because the City has outstanding municipal bonds,
the City posted these financial statements on the SEC’s EMMA website, the official source for
municipal securities data and disclosure documents. The City also provided these financial
statements to lenders and other third-parties. The City and the Act 47 team would certainly face
civil, and possibly even criminal, liability for knowingly understating the City’s assets by several
hundred million dollars and providing false financial statements in official, regulated securities
disclosures.
B The City explicitly recognized that the version of the Authority the City
incorporated in 1939 does not remain in existence.
On October 12, 2016, the City passed an ordinance establishing a stormwater
authority under the Municipal Authorities Act. Exhibit Q, October 12, 2016 City Ordinance.
In that ordinance, the City stated the following: “The City previously organized
the following authorities under the Municipal Authorities Act or its predecessor statute which
remain in existence: Chester Economic Development Authority, Chester Redevelopment
Authority and Chester Parking Authority.” Jd.
The City’s list conspicuously omits the Authority, and with good reason.
The City incorporated the Authority’s predecessor in 1939. The version ofthe
Authority that the City incorporated was governed by a board of exclusively City appointees.
That entity ceased to exist upon the passage of Act 73 in 2012. That new
legislation comprehensively reconstituted the Authority’s Board and governance structure,
creating a new iteration of the Authority as a result. Act 73 extinguished the City-incorporated
and governed version of the Authority and instead replaced it with a new Authority that has a
regional governance structure. The new board of the Authority has three appointees each from
the City, Chester County, and Delaware County.
The City’s 2016 stormwater authority ordinance simply recognized the obvious
fact that following Act 73, what the City incorporated in 1939 does not “remain in existence.”
So even the City itself recognizes that the version of the water authority it
incorporated does not “remain in existence,” and that the City has no claim of unilateral
ownership and control over the current Authority.
C. Although the City recognized that the Authority is not a City asset and the
City-incorporated version of the Authority no longer exists, the City tried to
unilaterally sell the Authority anyway.
The Authority’s Board has unanimously voted not to sell the Authority.
Despite this vote, the City had long desired to sell the Authority anyway.
On June 12, 2019, the City passed a resolution issuing a Request for Proposals to
sell the Authority.
The Authority challenged that June 12 RFP for several reasons, including that it
violated the Sunshine Act.
On July 1, 2019, Judge Bradley held a hearing on the Authority’s challenge.
After a full day of evidence and testimony, Judge Bradley emphatically ruled against the City
and enjoined the June 12 RFP. Judge Bradley stated: “In this particular case I think Chester City
fell far short of satisfying the requirements for the — you know, Sunshine Act. Exhibit A, July 1
Hearing Tr., 205:12-14. Judge Bradley formally entered an injunction order the next day, July 2.
Despite the injunction order, on August 14, 2019 the City Council passed a
second resolution purporting to authorize an RFP for the sale of the Authority.
On August 26, 2019, the City announced that at the upcoming City Council
meeting on August 28, the City would approve the final language of the second RFP, purportedly
authorized by the August 14 resolution. Exhibit B, Agenda from August 26, 2019 City Couneil
Deliberative Meeting (“6. Authorize to approve Issuance of a Request for Proposals”).
The City was blatantly disregarding the Court’s prior orders, which prohibited a
second RFP in the midst of this litigation. The City’s action necessitated an emergency hearing
on the morning of August 28. There, the Court unequivocally blocked City’s latest attack: “It’s
my decision that the terms of the July 2 order and the subsequent orders of August 6 and August
16 prevent the city from issuing an RFP.” Exhibit C, August 28 Hearing Transcript, 42:18-21.
Following that loss, at a, hearing on October 16, 2019 the City expressly said it
was abandoning the June 12 RFP.
In reliance on the City’s statement, the Court lifted the Sunshine Act injunction on
October 21, 2019. Exhibit D, Court Order of October 21, 2019.
Despite its multiple legal defeats, the City still desired to issue an RFP.
After much negotiation in January and February 2020, the City and the Authority
reached a Stipulation on the RFP.
The Court entered that Stipulation as an Order on February 3, 2020. Exhibit E,
Court Order of February 3, 2020.
The stipulation broadly precluded the City from taking an array of actions against
the Authority. Id.
Among other things, the City cannot interfere with, seize, or terminate the
Authority. Jd.
The stipulation also contained a small carve-out stating that these restrictions did
not prevent the issuance of an “exploratory” request for proposals to attempt to ascertain the
value of the Authority. Jd.
However, the stipulation did not ratify or otherwise sanction the RFP as legal. It
merely did not prohibit anyone from initiating a bid process. Id.
The stipulation was also clear that although a bid process could be initiated, no
attempted sale could close and the City is prohibited from attempting to “terminate, sell, transfer,
operate, dissolve, or dispose of the Authority or its assets, including but not limited to any
actions under 53 Pa. C.S. §§ 5607, 5619, or 5622.” Jd. This was consistent with the other
restrictions in the stipulation that were designed to keep the Authority and its assets in place and
undisturbed. Jd.
Finally, stipulation also expressly preserved the parties’ positions on the merits of
the Trust Petition. For the Authority, that position has always been clear: the City does not have
“any legal ability or right to sell or control the Authority or its assets... .” Jd. To the contrary,
the Authority expressly preserved its right to seek a Court ruling that the City does have
those rights. Jd.
On February 12, 2020, the City Council passed a resolution purporting to
authorize the City to issue an RFP to sell the Authority. See Exhibit F, February 12, 2020
Resolution (unofficial copy).
The City issued an RFP later that day. Exhibit G, February 12, 2020 RFP.
Responses were due on March 9, 2020. Pennsylvania American Water and Aqua
Pennsylvania submitted responses. In contrast, the Authority also reiterated its $60 million
settlement offer the Authority had publicly made to the City in, and which remained open since,
January 2019. The Authority also noted that the City had no power to unilaterally sell the
Authority and reiterated its objections to any claim by the City that it had any right or power to
On April 22, 2020 the City Council passed a follow-on resolution purporting to
authorize the City to negotiate with these three entities. See Exhibit M, April 22, 2020 Resolution
(unofficial copy).
On April 24, 2020, Judge Spiros Angelos issued two important rulings in the
various litigations between the Authority and the City. Exhibits M and N. Specifically, Judge
Spiros Angelos ruled that since the Authority is a regional entity, the City has no unilateral right
to sell the Authority in a hostile takeover.
One Court ruling on April 24 stated as follows: “[T]his Court concludes that any
transfer of all CWA assets be conducted solely by the governing body, to wit, the City of
Chester, Delaware County and Chester County in unison pursuant to Sections 5610(a.1) and
5622(a) of the MAA... .” Exhibit N, Court Order of April 24, 2020 in No. 217-219, at § 17.
The other Court ruling on April 24 stated as follows: “The 2020 legislative
amendment to Section 5610(a.1) established the City of Chester and the County of Delaware as
the governing body of the CWA. This amendment requires that any conveyance of the CWA
pursuant to Section 5622(a) be conducted and authorized by the City of Chester, the County of
Chester and the County of Delaware as the governing body which has the power collectively to
establish, maintain or operate the projects of the CWA.” Exhibit O, Court Order of April 24,
2020 in No. 2019-5976 at 4] 18-19.
These rulings confirm what the Authority has said all along: the City cannot ever
close on its unilateral February 12 RFP.
Accordingly, the Authority now brings this Amended Complaint to get a Court
declaration and injunction confirming that the City cannot ever close on the unilateral February
12 RFP ~as the City does not and cannot unilaterally own the Authority’s assets — or take any
further unilateral action interfering with the Authority.
lil. FOR MULTIPLE REASONS, THE CITY CANNOT CLOSE ON THE
FEBRUARY 12 RFP OR TAKE ANY OTHER UNILATERAL ACTION
AGAINST THE AUTHORITY.
A. The Court can approve the Trust based purely on deference to the
Authority’s Board, without ever reaching the City’s claim to unilaterally
control the Authority.
The only issue this Court needs to address at this time is whether the Authority’s
Trust Petition should be granted, i.e., whether the Trust Petition meets the requisite standards and
whether there is any legitimate challenge to its creation. The Court can and should make this
determination in the Authority’s favor without even reaching the issue of whether the City can
unilaterally seize, sell, or act against the Authority.
The Authority’s Board created the Chester Water Authority Trust and approved
the transfer of assets thereto.
These were official acts of the Authority’s Board for which substantial deference
must be afforded. In fact, common law provides that an arbitrary and capricious standard must
apply to the discretionary acts of municipal corporations in particular. Jn re Blumenschein v.
Housing Authority of Pittsburgh, 109 A.2d 331 (Pa. 1954) (a long-line of cases have reasoned
that courts will not review the discretionary actions of governmental entities absent a showing of
bad faith, fraud, capricious action or abuse of power); accord In re Sale of Pleasant Valley
Manor, 68 Pa. D. & C.2d 585 (Monroe Cty. Com. Pl. June 18, 1975). Practically speaking, this
standard affords substantial deference to the Authority and the official actions of its Board;
absent evidence of bad faith, fraud, capricious actions or abuse of power, the official actions of
the Authority’s Board should be free from scrutiny. See, e.g., Petition of Acchione, 227 A.2d 816
(Pa. 1967); In re Estate of Ryerss, 2008 WL 8568288 (Phila. Cty. O.C. Dec. 9, 2008).
Here, there have been no allegations of bad faith Board conduct and nobody,
including the City, has challenged the Board’s discretionary decision to create the Trust.
Therefore, because the creation of the trust is already in process and has not been
challenged, the Court can approve finalization of the trust on that basis alone. The City’s
argument that it can unilaterally seize, sell, and act against the Authority is irrelevant and would
only come into play if the Trust, which again has not been challenged, was disapproved.
This is not a new argument. In various other places in litigation between these
parties, the Authority has already explained why the Court can approve the Trust based purely on
deference to the Authority’s Board, without ever reaching the City’s claim to unilaterally control
the Authority. Most recently, the Authority explained this argument in its motion and briefing
for judgment on the pleadings.
B The City has no power under the Municipality Authorities Act to unilaterally
sell the Authority.
The February 12 Resolution and RFP are invalid because, as the Court ruled on
April 24, the City cannot unilaterally dissolve, sell, or disrupt the Authority.
One Court ruling on April 24 stated as follows: “[T]his Court concludes that any
transfer of all CWA assets be conducted solely by the governing body, to wit, the City of
Chester, Delaware County and Chester County in unison pursuant to Sections 5610(a.1) and
5622(a) of the MAA... .” Exhibit N, Court Order of April 24, 2020 in No. 217-219, at § 17.
The other Court ruling on April 24 stated as follows: “The 2020 legislative
amendment to Section 5610(a.1) established the City of Chester and the County of Delaware as
the governing body of the CWA. This amendment requires that any conveyance of the CWA
pursuant to Section 5622(a) be conducted and authorized by the City of Chester, the County of
Chester and the County of Delaware as the governing body which has the power collectively to
establish, maintain or operate the projects of the CWA.” Exhibit O, Court Order of April 24,
2020 in No. 2019-5976 at 4] 18-19.
These rulings flatly prohibit the City from attempting to close on its unilateral
February 12 RFP.
C. The Environmental Rights Amendment prohibits the City from seizing and
selling the public natural resources of the Authority for the City’s own
benefit.
The City has asserted that it has a “statutorily-created beneficial interest in the
Authority’s assets” and that it may engage in a “dissolution process[,]” which involves “issuing
an RFP for the assets” of the Authority in order to “[e]xplore [mJonetization[.]”. City
Memorandum in Support of Motion for Judgment on the Pleadings, at 8, 17-18. As explained
above, the City has no such right under the MAA. But assuming, arguendo, it does have such a
right, exercising it in the manner the City contemplates would be a breach of Article I, Section
27 of the Pennsylvania Constitution—the Environmental Rights Amendment (“Section 27”).
Understanding why this is so begins with a review of the plain text of Section 27,
which was passed by the voters in 1971. Section 27 is part of the Pennsylvania Constitution’s
Declaration of Rights, and it provides as follows:
The people have a right to clean air, pure water, and to the preservation of the
natural, scenic, historic and esthetic values of the environment. Pennsylvania's
public natural resources are the common property of all the people, including
generations yet to come. As trustee of these resources, the Commonwealth shall
conserve and maintain them for the benefit of all the people.
Pa. Const. art. I, § 27.
Relevant here, “[t]he third clause of Section 27 establishes a public trust, pursuant
to which the natural resources are the corpus of the trust, the Commonwealth is the trustee, and
the people are the named beneficiaries.” Pennsylvania Envtl. Def. Found. v. Commonwealth
(“PEDF”), 161 A.3d 911, 931-32 (Pa. 2017) (footnote omitted). These “[t]rustee obligations[,]”
the Supreme Court has explained, “are not vested exclusively in any single branch of
Pennsylvania’s government[.]” /d. at 932 n.23. “[I]nstead[,] all agencies,and entities of the
Commonwealth government, both statewide and local, have a fiduciary duty to act toward the
corpus with prudence, loyalty, and impartiality.” Jd. Therefore, both the City and the Authority
are trustees of Pennsylvania’s public natural resources.
In this case, the meaning of “public natural resources” includes, at a minimum,
the “pure water” identified as a public right in the first sentence of Section 27: “the concept of
public natural resources includes not only state-owned lands, waterways, and mineral reserves,
but also resources that implicate the public interest, such as ambient air, surface and ground
water, wild flora, and fauna (including fish) that are outside the scope of purely private
property.” Robinson Twp. v. Commonwealth, 83 A.3d 901, 955 (Pa. 2013). As a matter of law,
“public natural resources” must include the lands and water of the Octoraro Reservoir and the
surface water of the Susquehanna River for which the Authority maintains permits. Furthermore,
it must also include the treatment and distribution infrastructure that the Authority uses to
distribute “pure water” to its ratepayers. Afterall, without this infrastructure, there is no way for
the citizens to receive and enjoy their Constitutionally protected “pure water.” Undoubtedly,
these are “resources that implicate the public interest[.]” Jd.
Accordingly, the ultimate question before the Court in this litigation is whether
the City—a trustee under Section 27 with a fiduciary duty to trust beneficiaries—may sell the
corpus of the trust to a private entity and use the proceeds for its own unrelated purposes?
Hornbook trust law—and a binding decision of the Pennsylvania Supreme Court—dictates the
answer: no.
“Pennsylvania trust law dictates that proceeds from the sale of trust assets are
trust principal and remain part ofthe corpus of the trust.” PEDF, 161 A.3d at 935. Therefore,
“[w]hen a trust asset is removed from the trust, all revenue received in exchange for the trust
asset is returned to the trust as part of its corpus.” /d. We are.aware of no decision by any court
in the nation that has ever allowed a trustee to sell a trust asset and use the proceeds for itself.
That such a disposition of property is improper hardly needs a citation. It is, by definition, a loss
to the estate. And “[i]t is well-settled in this Commonwealth that a fiduciary who has negligently
caused a loss to an estate may properly be surcharged for the amount of such loss.” Jn re Lohm's
Estate, 269 A.2d 451, 454 (Pa. 1970). Necessarily, where a negligent loss to the corpus is subject
to surcharge, an intentional misappropriation of trust assets must be as well. Cf, Com. v. Levi
Pa.Super. 253, 264 (1910) (“Conversion, by the trustee, of a trust fund to any other use than that
of the cestui que trust is prima facie fraudulent”).
The course of action the City ultimately asks this Court to endorse is untenable
because it is completely inconsistent with the City’s obligations under Section 27 as a trustee and
fiduciary of Pennsylvania’s public natural resources. Accordingly, the Court cannot allow the
City to seize and sell the Authority. The only proper order is to prohibit the City from closing on
the February 12 RFP and otherwise attempting to dissolve the Authority or sell its assets.
This is not a new argument. In various other places in litigation between these
parties, the Authority has already explained at length why the ERA prohibits the City from
seizing the Authority’s public natural resources for its own benefit. Most recently, the Authority
explained this argument in its motion and briefing for judgment on the pleadings.
D. The City’s February 12 RFP also fails because the City issued it via
resolution, when an ordinance was required.
Even if the City has the legal power to sell or otherwise act against the Authority
— which the City does not — the February 12 RFP fails for a separate reason: The City issued the
February 12 RFP via a resolution, when an ordinance was required:
The City’s Home Rule Charter says that an ordinance can only be modified or
repealed by another ordinance. A resolution is not enough. Exhibit H, City of Chester Home
Rule Charter, art. IV, § 401(H).
Here, ordinances passed in 1939, 1965, and 1998 created the Authority and
extended its existence until 2048. See Exhibit I, July 6, 1939 Chester Municipal Authority
Articles of Incorporation; Exhibit J, February 23, 1965 City of Chester Ordinance No. 3; and
Exhibit K, December 10, 1998 City of Chester Ordinance No. 24.
Because ordinances created the Authority’s existence through 2048, only another
ordinance is enough to prematurely terminate that existence.
Therefore, the February 12 RFP should have been done by ordinance, not
resolution.
Likewise, the City’s follow-on April 22 resolution should have been done by
ordinance.
The fact that the City cannot act against the Authority via resolution is also not a
new argument. Most recently, the Authority explained this argument in its Amended Complaint
in the Sunshine Acct litigation between the parties, No. 2019-5400 (Civil Division).
THE CROSS-FILED AMENDED ANCILLARY PETITION IS A MORE
APPROPRIATE PROCEDURAL VEHICLE THAN THIS AMENDED
COMPLAINT BECAUSE IT CONCERNS LEGAL ISSUES DIRECTLY
RELATED TO THE UNDERLYING TRUST PETITION.
In light of the Court’s prior ruling on the Authority’s first two Ancillary Petitions,
discussed below, the Authority is cross-filing a substantially identical version of this Amended
Complaint as an Amended Ancillary Petition in the Trust Proceeding. However, the Authority
believes that the issues raised here should be decided in the Orphan’s Court matter, where they
most properly belong.
That petition for review is properly brought as an amended ancillary petition to
the Authority’s Trust Petition pursuant to Pennsylvania Orphans’ Court Rule 3.6 because the
February 12 Resolution and RFP are inconsistent with the relief the Authority seeks in its Trust
Petition. Simply put, allowing the City to seize and sell the Authority — which the Court should
not do — will necessarily preclude the Trust Petition from being finalized. Both cannot happen.
The Orphans’ Court has mandatory and exclusive jurisdiction over inter vivos
trusts.and the assets and disputes related thereto. See 20 Pa.C.S. § 711 (“Except as provided in
section 712 (relating to nonmandatory exercise of jurisdiction through the orphans’ court
division) . . . , the jurisdiction of the court of common pleas over the following shall be exercised
through its orphans’ court division: . . . (3) Inter vivos trusts.--The administration and
distribution ofthe real and personal property of inter vivos trusts, and the reformation or setting
aside of any such trusts [.]”)
This exclusive jurisdiction controls here because property at issue in the Trust
Petition is the subject of existing inter vivos trusts under Pennsylvania law, Pa. Const. art. I, § 27,
and by instrument pursuant to the Authority’s Trust. It follows that a dispute concerning the
Authority’s ability to administer the trust property and protect the res properly belongs in the
Orphans’ Court.
Twice before in this litigation, the Authority brought Ancillary Petitions
challenging the illegal City’s resolutions of August 14, 2019 and October 23, 2019, The City.
argued that those Ancillary Petitions were the incorrect procedural vehicles for such challenges.
Specifically, the City argued that the “Petition was not even properly
characterized as ‘ancillary,’ because it was unrelated to the issues being contested in the
Orphan’s Court matter.” City’s Memorandum in Support of Preliminary Objections to First
Ancillary Petition, 2.. Basedupon the City’s argument that the illegal August 14 Resolution was
“unrelated” to the Trust Matter, the Court transferred the Ancillary Petitions to the Sunshine Act
litigation. See Exhibit L, Court’s December 9 Order. The Court made clear, based on the City’s
argument at the time, that the prior Ancillary Petitions were issues that could be set aside while
the parties and the Court focused on core issues in the Trust Matter. As the Court stated when it
Even if jurisdiction in Orphans’ Court were not exclusive, it would attach as
“nonmandatory” because this is, at minimum, a “case where there are substantial questions
concerning matters enumerated in section 711 and also matters not enumerated in that section.”
20 Pa.C.S. § 712(3); see In re Estate of Hall, 535 A.2d 47, 59 (Pa. 1987) (“20 Pa.C.S. § 712
confers upon the Orphans’ Court Division broad residual and discretionary jurisdiction over all
matters that are subject to resolution by courts of common pleas generally.”).
transferred the Ancillary Petitions: “This Order of Court is entered in to limit the issues in this
proceeding and to expedite a final disposition.” Jd.
That reasoning is inapplicable here.
This Amended Complaint squarely addresses one of the same core legal
principals at issue in this Trust Proceeding: whether the City can unilaterally sell or otherwise act
against the Authority after (1) the Authority’s Board has already determined that a sale is not in
customers’ best interest and approved the creation of the trust and (2) the City failed to challenge
those Board actions.
The parties have extensively briefed this very issue in their motions for judgment
on the pleadings in the Trust Petition.
Therefore, the only sensible place to argue this Amended Complaint is in the
Trust Proceeding.
To avoid the City wasting or duplicating effort, the Authority suggests that the
Court stay this matter so thatthe issues can be decided through the merits of the Trust Petition,
where they most properly belong.
In the event that the Court’s ruling on motions for judgment on the pleadings
pending in the Trust Petition does not already cover the issues raised here, the Court can order a
response at that time.
COUNT I - DECLARATION INVALIDATING THE CITY’S FEBRUARY 12
RESOLUTION AND RFP
(against the City)
The Authority incorporates all preceding paragraphs of this Amended Complaint
as if set forth in full herein.
WHEREFORE, for all of the foregoing reasons, the Authority respectfully requests that
the Court (1) declare that the City is prohibited from closing on the sale contemplated by the
City’s unilateral February 12, 2020 and April 22, 2020 Resolutions; (2) reverse, vacate and/or
permanently enjoin the City’s February 12, 2020 Resolution and RFP and the City’s follow-on
April 22, 2020 Resolution to the extent they purport to give the City the unilateral power to close
ona sale of the Authority; and (3) prohibit the City from unilaterally closing on a sale of the
Authority or otherwise acting unilaterally against the Authority in any way; and (4) grant the
Authority any other reliefat law or in equity to which it is entitled.
Respectfully submitted,
Dated: May 22, 2020 By: /s/ Kevin Dooley Kent
Kevin Dooley Kent (No. 85962)
Joseph W. Jesiolowski (No. 307323)
Megan A. Guernsey (No. 202065)
Andrew K. Garden (No. 314708)
CONRAD O’BRIEN PC
Centre Square West Tower
1500 Market Street, Suite 3900
Philadelphia, PA 19102-2100
Ph: (215) 864-9600/ Fax: (215) 864-9620
Email: kkent@conradobrien.com
jjesiolowski@conradobrien.com
mguernsey@conradobrien.com
agarden@conradobrien.com
Attorneys for Chester Water Authority
CERTIFICATE OF COMPLIANCE
I certify that this filing complies with the provisions of the Case Records Public Access
Policy of the Unified Judicial System of Pennsylvania that require filing confidential information
and documents differently than non-confidential information and documents.
Respectfully submitted,
Dated: May 22, 2020 By /s/ Kevin Dooley Kent
Kevin Dooley Kent (No. 85962)
Joseph W. Jesiolowski (No. 307323)
MeganA. Guernsey (No. 202065)
Andrew K. Garden (No. 314708)
CONRAD O’BRIEN PC
Centre Square West Tower
1500 Market Street, Suite 3900
Philadelphia, PA 19102-2100
Ph: (215) 864-9600/ Fax: (215) 864-9620
Email: kkent@conradobrien.com
jjesiolowski@conradobrien.com
mguernsey@conradobrien.com
agarden@conradobrien.com
Attorneys for Chester Water Authority
CERTIFICATE OF SERVICE
Thereby certify that on the date set forth below I caused a true and correct copy of the
foregoing Amended Complaint to be served on all counsel of record by electronic mail, as
follows:
Kenneth R. Schuster Kevin Greenberg
CHUSTER Joel M. Eads
334 W. Front Street George J. Farrell
Media, PA 19063 REENBERG RAURIG
Attorney for City of Chester 1717 Arch Street, Suite 400
Philadelphia, PA 19103
Attorneys for City of Chester
Respectfully submitted,
Dated: May 22, 2020 By /s/ Kevin Dooley Kent
Kevin Dooley Kent (No. 85962)
Joseph W. Jesiolowski (No. 307323)
MeganA. Guernsey (No. 202065)
Andrew K. Garden (No. 314708)
CONRAD O’BRIEN PC
Centre Square West Tower
1500 Market Street, Suite 3900
Philadelphia, PA 19102-2100
Ph: (215) 864-9600/ Fax: (215) 864-9620
Email: kkent@conradobrien.com
jjesiolowski@conradobrien.com
mguernsey@conradobrien.com
agarden@conradobrien.com
Attorneys for Chester Water Authority
VERIFICATION
I, Cynthia F. Leitzell, have the title of Chairperson of the Board of the Chester Water
Authority. In that capacity, | am authorized to make this Verification.
I verify and affirm that the averments of fact made in the forgoing Amended Complaint
are true and correct to the best of my knowledge, information, and belief.
This Verification is made subject to the penalties of 18 Pa.C.S, § 4904, relating to
unsworn falsification to authorities.
ba. 6 Lp
Dated: _.5 | 2A [po
Exhibit A
kK kk KK No. 5400-19
vs.
AQUA PENNSYLVANIA, INC. AND
CITY OF CHESTER
BEFORE: THE HONORAB
JOSEPH JESIOLO
MEGAN GUERN
For the Plaintiff, Ch
KENNETH SCH
KEVIN GREEN
JOEL EADS, ESQUIRE
GEORGE FARRELL
For the Defendant,
JOEL FRANK, ESQUIRE
JOHN CUNNIN
ROCCO IMPERATRICE,
For the Defendant,
2704 Commerce Drive, Ste. D, Harrisburg, PA 17110 (717) 233-6664
cow
ae
covyw
Exhibit B
AGENDA
August 26, 2019
Deliberative Meeting
Resolution—
Authorize to approve Handicap Parking Zones;
Authorize to approve Ratifying Appointment of Laborer in Streets Department;
Authorize to approve Refund for Park Permit for Cancelled Event;
Authorize to approve Advertisement for Applications for 2019-2020 Crossing Guards Positions;
Authorize to approve Ratifying Entering into Agreements with Heritage Business Systems, Inc.;
Authorize to approve Issuance of a Request for Proposals;
Authorize to approve Expenditure List;
Exhibit C
kK kk KK Nos 19-005400
19-000217
vs
INC.,
et al.
BEFORE: THE HONORAB
KEVIN KENT, ESQUIRE
JOSEPH JESIOLO
FRANCIS CAT
For the Plaintiff
KEVIN GREEN
KENNETH R.
THOMAS L. WHIT
For the Defendant,
JOHN J. CUNNIN
SCOT R. WIT
ROCCO P. IMPERATRI
MICHAEL SOULE, ESQUIRE
For the Defendant, Aq
Diaz Transcription Services
2704 Commerce Drive, Ste. D, Harrisburg, PA 17110 ~ (717) 233-6664
THE COURT: All right.
MR. GREENBERG: Th
[Off the recor
THE COURT: All right.
Diaz Transcription Services
2704 Commerce Drive, Ste. D, Harrisburg, PA 17110 ~ (717) 233-6664
Exhibit D
IN THE COURT OF COMMON PLEAS OF DELAWARE COUNTY, PENNSYLVANIA
CIVIL ACTION-LAW
CHESTER WATER AUTHORITY No. 2019-5400
Vv.
AQUA PENNSYLVANIA, INC. and
CITY OF CHESTER
ORDER
AND NOW, this 21% day of October, 2019, after full evidentiary conducted on October
16, 2019 on the review of the Preliminary Injunction entered at this docket initially
on July 1,
2019, as amended, thereafter through Orders last entered on September 25, 2019, it
is hereby
ORDERED and DECREED that the Preliminary Injunction on the above-referenced matter is
hereby VACATED and DISSOLVED.
The Complaint and Petition for Special and Preliminary Injunction sought to enjoin
Item
No. 15 on the June 12, 2019 City of Chester Council meeting which approved a solicitat
ion of
Requests for Proposals to purchase the Chester Water Authority. The initial injunction was
entered due to a finding of violation of the Sunshine Act 65 Pa. C.S.A §701 at seq. and
accompanying harm.
At the hearing on October 16, 2019, the Honorable Thaddeus Kirkland, Mayor of the
City of Chester testified credibly that the City had ceased all efforts to implement the terms of
the June 12, 2019 RFP Resolution for the Chester Water Authority and returned all sealed bids to
potential suitors unopened. The constraints on Judicial review for violations of the Sunshine Act
contained in 65 Pa. C.S.A. § 713 limit the authority of the Court to invalidate the official action
take at the meeting. Herein, the June 12, 2019 Resolution has been abandoned.
The Order entered by this court this date does not amend or address the injunction
entered in the Chester Water Authority Trust Petition at Orphans Court
No. 217-2019.
This Order does not address any issues raised in related complaints brough