Maryland State Highway Administration v. Engineering Management Services, Inc.

JOHN J. BISHOP, Judge, Retired, Specially Assigned. This appeal arises from a dispute between Engineering Management Services, Inc., Appellee (“EMS”), and the Maryland State Highway Administration, Appellant (“SHA”), over a contract for the removal of lead paint and the repainting of five bridges. In March 1993, Appellant, SHA, requested bids for the removal of lead-based paint and the repainting of 5 bridges over 1-95 in Baltimore and Howard Counties. Appel-lee, EMS, submitted a bid.

By letter dated April 13, 1993, EMS was notified that it was the successful bidder. The contract required EMS to comply with the Environmental Protection Agency (“EPA”) National Ambient Air Quality Standards, 40 C.F.R. Part 50, which establishes a general permissible exposure limit for particulate matter of 150 micrograms per cubic meter. The contract further required EMS to comply with “all Federal, State, and local laws, regulations and ordinances applicable to its activities and obligations under this contract.” Specifically, the contract ¹³⁶ subjected EMS to 29 C.F.R. § 1926 , which contains the Federal Occupational Safety and Health Administration (“OSHA”) regulations “as revised from time to time.” On May 4, 1993, twenty-one days after EMS accepted SHA’s bid, OSHA issued new regulations, titled “Lead Exposure in Construction,” imposing more stringent standards regarding exposure of workers to lead. The new regulations were published in the Federal Register one month after the acceptance of the bid with an effective date of June 3, 1993. 58 Fed.Reg. 26, 627 (May 4 1993).

Before the promulgation of the new regulations, OSHA regulations for lead exposure did not apply to construction workers. The new regulations, which were applicable to construction workers, imposed a maximum permissible exposure limit for lead of 50 micrograms per cubic meter, and also required special precautions such as protective clothing and equipment and special hygiene facilities and practices. (Since 1984, the Maryland Occupational Safety and Health Administration (MOSHA) has issued regulations that apply to construction workers exposed to lead. See COMAR 09.12.32.

These regulations provide for a permissible exposure to lead of 50 micrograms per cubic meter, the same standard adopted by OSHA in 1993. When the OSHA regulations came into effect, they superseded the MOSHA regulations). On May 21, 1993, SHA issued a formal Notice of Award to EMS and a Notice to Proceed was issued on July 26, 1993. EMS did not begin performance on the contract until September 30,1993.

On April 22,1994, approximately one year after the effective date of the revised regulations, EMS’s Vice President and Project Manager, David Aulakh, wrote a letter to SHA in which he made the following request: With reference to the change in OSHA standard for compliance with National Ambient Air Quality Standard, kindly advise us which standard we should follow for this project. Do we use the standard as stated in the specification which is 150 |x g/m3 over a 24 hour time period or the new OSHA ¹³⁷ standard which was adopted late last year and states that [sic] 50 pg/m * over a 24 hour time period? By letter dated April 27, 1994, SHA’s District Engineer, Douglas R. Rose, advised EMS: The Permissible Exposure Limit (PEL) in accordance with the Occupational Exposure to Lead in Construction Work, COMAR 09.12-32, is 50 micrograms/cubic meter (50 Sg/m3) averaged over an 8 hour period, adopted November 28,1988. The National Ambient Air Quality Standards according to 40 CFR Part 50 is 150 pg/m3 over a 24 hour [sic].

The Department of Labor Occupational Safety and Health Administration, 29 CFR Part 1926, dated May 4, 1993, reduced the permitted level of exposure to lead for construction workers from 200 pg/m3 as an 8-hour time weighted average (TWA) to an 8-hour TWA of 50 pg/m3. Sometimes there will be conflict between two provisions. The more specific and most stringent specification should govern over the less strict provision. The contract Special Provisions, pages 110 and 111 do chart the compliance levels for Permissible Exposure Limits.

On May 2,1994, Aulakh advised SHA that EMS was unable to continue working on the above referenced project because we are presently [sic] for the results of tests we have taken to evaluate compliance with OSHA regulations. As soon as we receive these results we will be able to evaluate our engineering controls and adjust accordingly. This process will take a few days. More than ten months later, on March 6, 1995, EMS wrote to SHA requesting an 180-day extension on the contract due to “the increased loss of productivity resulting from new Health and Safety Regulations that have been enacted after the start of this contract.” Aulakh explained that “[t]he current production rate under these new conditions is approximately 550 square feet per day.

Previously our rate was approximately 1,500 square feet per day. This 64% decrease ¹³⁸ has greatly impacted our schedule and is the basis for our extension request.” On March 23, 1995, SHA replied to EMS, taking issue with the complaints raised in EMS’ letter of March 6, 1995. SHA denied EMS’ request for a 180-day extension on the project, but agreed to a shorter extension. On June 13, 1995, Aulakh again wrote to SHA requesting $1,244,564 in additional compensation due to changes in the Lead Exposure Regulations codified at 29 CFR 1926.62.

The parties met to discuss a possible resolution to their conflict, but no final agreement was reached. EMS later requested additional compensation in the amount of $2,377,341, but subsequently reduced its request to $764,036. By letter dated June 28, 1999, SHA denied EMS’s claim for additional compensation and a time extension. EMS filed a timely appeal to the Maryland State Board of Contract Appeals (“the Board”) seeking the time extension and an equitable adjustment to the contract in the amount of $764,036.

SHA moved for summary disposition of the appeal on the grounds that EMS failed to file a timely notice of claim. The Board agreed with SHA and dismissed the appeal, ruling, in part, as follows: Applying the provisions relating to timely filing of a claim as set forth in COMAR and the general provisions of the Contract, a notice of claim was required to be filed within thirty (30) days after the basis for the claim was known or should have been known. For EMS’ claim relating to additional costs allegedly resulting from new OSHA regulations to be timely, a notice of claim arguably should have been filed no later than 30 days after the OSHA regulations became effective on- June 3, 1993 and certainly within 30 days of the completion of [EMS’] cost evaluation of the effect of compliance in May, 1994. We recognize that cost quantification or documentation may not have been possible on the day the new regulations took effect or were held to be applicable to [EMS’] Contract and would have been dependent on any actual additional costs related to compli- ¹³⁹ anee with the new regulations incurred during performance.

However, EMS did not file its notice of claim until March 6, 1995. The notice of claim reflects EMS’ awareness that the new regulations were having an alleged cost impact on its performance of the Contract for more than thirty days prior to March 6, 1995. The Board may not consider a claim for which notice is late. Accordingly, the Motion for Summary Disposition is granted and the appeal is dismissed with prejudice.

EMS filed a petition for judicial review in the Circuit Court for Baltimore City. The circuit court issued a memorandum opinion reversing the Board’s decision. The court determined that the Board erred in its summary disposition of EMS’ appeal because there are no rules or regulations regarding the standards to be applied in such a proceeding. The court further determined that the time limit for filing claims with SHA, that is, “30 days after the basis for the claim is known or should have been known,” is a subjective measurement.

According to the court, a determination of whether EMS’ measurement of the increased costs associated with the new OSHA standards was completed in a timely fashion required a factual determination that is “not amenable to summary disposition imposing a [Board] interpretation, without a fair hearing of both sides of the timeliness dispute.” This appeal followed. The sole issue presented for our consideration is whether the Board properly granted summary disposition against EMS for failure to file a timely written notice of claim. SCOPE OF REVIEW In reviewing a decision of an administrative agency, we distinguish between the agency’s findings of fact, to which great deference is due under the clearly erroneous standard, and the agency’s rulings of law, for which courts do not hesitate to substitute their judgment for that of the agency. Our review of the agency’s findings of fact is limited to determining whether there is substantial evidence in the ad ¹⁴⁰ ministrative record as a whole to support the agency’s findings and conclusions.

The test is a deferential one which requires restrained and disciplined judicial judgment. We may not substitute our judgment for that of the agency or interfere with the agency’s factual conclusions. Young v. Bd. of Physician Quality Assurance, 111 Md.App. 721, 725-27 , 684 A.2d 17 (1996), cert. dismissed, 346 Md. 314 , 697 A.2d 82 (1997). We owe no deference to agency conclusions based upon errors of law, to which the substituted judgment standard applies.

State Ethics v. Antonetti, 365 Md. 428, 447 , 780 A.2d 1154 (2001); Dep’t of Health & Mental Hygiene v. Reeders Mem. Home, Inc., 86 Md.App. 447, 452-53 , 586 A.2d 1295 (1991). DISCUSSION Appellant contends that the Board was authorized to grant summary disposition to EMS’ claim and that it acted in accordance with that authority. EMS contends, inter alia, that the “undefined, unwritten ‘summary disposition’ procedure” utilized by the Board was not authorized by statute or regulation and violates due process.

EMS further contends that, even if the summary disposition procedure was authorized, the Board improperly granted summary disposition because the issue of whether timely notice of the claim was given to SHA involved a factual dispute as to when EMS knew or should have known of the basis for its claim. We agree with Appellant that the Board was authorized to grant summary disposition and that it acted properly in summarily disposing of EMS’ claim. The Board was created by statute as an independent unit of the Executive Branch of the State government. Md.Code Ann., State Fin. & Proc. § 15-206.

(Unless noted otherwise, all references to the Maryland Annotated Code and COMAR are to the versions that were in effect' in 1993.) Pursuant to statute, the Board, in accordance with Title 10, Subtitle 1 of the State Government article, is required to adopt regulations that provide for informal, expeditious, and inexpensive resolution of appeals. Md.Code Ann. State Fin. & Proc., § 15-210. ¹⁴¹ State Finance and Procurement article, Section 15 — 216(b), provides that the Board “shall conduct proceedings in accordance with Title 10, Subtitle 2 of the State Government Article,” which governs contested cases subject to the Administrative Procedure Act. Section 10-210 specifically provides that, unless otherwise precluded by law, an agency or the Office of Administrative Hearings may dispose of a contested case by, inter alia, summary disposition. It is undisputed that the Board did not adopt regulations which provide the procedural details of a summary disposition proceeding.

There is, however, no statutory requirement that the Board provide specific summary disposition standards in its procedural regulations. SHA argues that it was within the discretion of the Board to proceed either by regulation or by decisional rule in determining the procedural details of a summary disposition proceeding. EMS argues that because no standard was adopted for summary disposition, the Board could not resolve this case by summary disposition. In Stifler v. Weiner, 62 Md.App. 19 , 488 A.2d 192 (1985), we addressed the issue of whether the panel chairman, in a case before the Health Claims Arbitration Office, was authorized to summarily dispose of a case that was barred by the applicable statute of limitations.

We wrote: Although there is no provision in the statute for summary disposition (compare Md. Rule 2-501), we see no reason why a claim cannot be adjudicated on that basis in those instances where it may be susceptible to such treatment. If, for example, as here, limitations has clearly run on the claim, there is no reason to waste time, effort, and money on a full-scale trial on the merits of the claim. Stifler, 62 Md.App. at 25 , 488 A.2d 192 . See also Quesenberry v. Washington Suburban Sanitary Comm’n, 311 Md. 417, 425 , 535 A.2d 481 (1988)(“we do not suggest that administrative bodies performing quasi-judicial functions may not avail themselves of summary dispositions when the relevant adjudicative facts are not in dispute.”). ¹⁴² In the case sub judice, while there is no regulation with regard to the procedural aspects of summary disposition, the Board used a recognized and appropriate standard identical to Md. Rule 2-501, Motion For Summary Judgment.

Delmarva Power & Light Co. d/b/a Connectiv Power Delivery v. Public Service Comm’n of Md., 370 Md. 1 , 803 A.2d 460 (2002); Maryland Ass’n of Health Maintenance Organizations v. Health Services Cost Review Comm’n, 356 Md. 581, 600 , 741 A.2d 483 (1999)(agency has some measure of freedom to develop and apply standards that interpret or implement statutes that they administer through adjudication rather than regulation). See also Patchogue Nursing Center v. Bowen, 797 F.2d 1137, 1143 (2d Cir.l986)(as long as agency proceeds in accordance with “ascertainable standards” and provides statement of reasoning when applying the standards, court need not require