Ahern et al v. Chesapeake Energy Corporation et al

REPLY BRIEF re MOTION to Compel Arbitration of First, Second, Third, Seventh and Eighth Clauses of Action in Pls' Am Compl for 4 Pls and to Stay Claims Pending Arbitration

M.D. Pa.June 27, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA KYLIE E. AHERN, a/k/a KYLIE E, PERRY and MATTHEW J. AHERN, et al., Plaintiffs, vs. CHESAPEAKE ENERGY CORPORATION, et al., Defendants. : : : : : : : : : Case No. 4:16-cv-01347-MWB Judge Matthew W. Brann Complaint filed: 06/28/16 Electronically Filed ANADARKO DEFENDANTS’ REPLY BRIEF John A. Snyder, Esquire I.D. No. 66295 jasnyder@mqblaw.com McQUAIDE BLASKO, INC. 811 University Drive State College, PA 16801 (814) 238-4926 Fax: (814) 234-5620 Attorneys for Defendants Anadarko Petroleum Corporation and Anadarko E&P Onshore LLC, f/k/a Anadarko E&P Company LP Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 1 of 23 i TABLE OF CONTENTS Page I. The Doctrine of Equitable Estoppel Allows APC to Invoke the Arbitration Clauses in the Leases. ................................................................... 2 A. The Third Circuit Has Already Held that Equitable Estoppel Is Consistent with Pennsylvania Law. ...................................................... 2 B. The Arbitration Plaintiffs Rely Upon Pennsylvania Authority that Does Not Contradict Existing Federal Precedent. ......................... 6 II. The Relevant Arbitration Provisions Do Not Bar the Application of Equitable Estoppel. .......................................................................................... 7 A. Federal Precedent Applying Pennsylvania State Law Allows a Non-Signatory to Invoke an Arbitration Clause Under an Equitable Estoppel Theory When the Clause Covers Disputes “Between” the Parties to the Agreement. .............................................. 8 B. Some of the Arbitration Plaintiffs Do Not Have Arbitration Provisions that Limit Arbitration to Disputes between Lessor and Lessee. .......................................................................................... 11 III. The Arbitration Plaintiffs’ Antitrust and RICO Claims As Pleaded Rely Upon the Leases. ................................................................................... 12 IV. The Arbitration Plaintiffs’ Ninth Cause of Action Improperly Asks this Court to Overrule the AAA on a Decision of Arbitration Procedure. ...................................................................................................... 16 Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 2 of 23 ii TABLE OF AUTHORITIES Cases Academy of Medicine v. Aetna Health, Inc., 108 Ohio St. 3d 185 (Ohio 2006) ......................................................................... 15 Aluminum Bahrain B.S.C. v. Dahdaleh, 17 F.Supp.3d 461 (W.D. Pa. 2014) ........................................................................ 4 Arthur Andersen LLP, v. Carlisle, 556 U.S. 624 (2009) ........................................................................................ passim Bannett v. Hankin, 331 F. Supp. 2d 354 (E.D. Pa. 2004)...................................................................... 7 Barletto v. Heuschkel, 21 Pa. D. & C. 5th at 402–03, 2011 Pa. Dist. & Cnty. Dec. LEXIS 318 ............... 7 Bontempo v. Wolpoff & Abramson, 2006 WL 3040905 (W.D. Pa. Oct. 24, 2009) ......................................................... 7 Caparra v. Maggiano’s Inc., 2015 WL 5144030 (E.D. Pa. Sept. 1, 2015) .......................................................4, 8 Carasquilla v. Mazda Motors Corporation, 197 F.Supp.2d 16 (M.D. Pa. 2002) ....................................................................4, 5 Colon v. Conchetta, Inc., 2017 WL 2572517 (E.D. Pa. June 14, 2017) (slip op.) ........................... 4, 8, 9, 11 Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir. 1995) ....................................................................... 14, 15 E.I. Dupont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates S.A.S., 269 F.3d 187 (3d Cir. 2001) ................................................................................... 3 Elwyn v. Deluca, 48 A.3d 457 .......................................................................................................... 10 Esis, Inc. v. Coventry Health Care Workers Comp., Inc., 2016 WL 928667 (E.D. Pa. March 9, 2016) .......................................................... 4 Estate of Stiles v. Chesapeake Appalachia, LLC, 2014 Pa. Super. Unpub. LEXIS 3037 (Pa. Super. Ct. June 17, 2014) ................. 15 Glenwright v. Carbondale Nursing Home, Inc., Civ. Act. No. 3:16-0926, 2017 WL 1092541 ......................................................... 4 Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 3 of 23 iii Griswold v. Coventry First LLC, 762 F.3d 264 (3d Cir. 2014) .......................................................................... 3, 4, 6 Hittle v. Scripto-Tokai Corp., 166 F.2d 159 (M.D. Pa. 2001) ................................................................................ 5 Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) ................................................................................ 3 Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., 845 F.3d 1351 (11th Cir. 2017) ............................................................................ 10 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) ............................................................................................. 15 Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042 (2009) ........................................................................................... 11 Novelty Knitting Mills, Inc. v. Siskind, 457 A.2d 502 (Pa. 1983)......................................................................................... 6 Pesotine v. Liberty Mut. Grp., Inc., No. 3:14-CV-784, 2014 WL 4215535 (M.D. Pa. Aug. 25, 2014) ......................... 6 Sanford v. Bracewell & Giuliani, LLP, 618 Fed. Appx. 114 (3d Cir. 2015) ....................................................................4, 6 Torres v. CleanNet, U.S.A., 90 F. Supp. 3d 369 (E.D. Pa. 2015) ........................................................................ 4 Zeglen v. Nw. Mut. Life Ins. Co., No. 3:14-CV-00173, 2014 WL 4215531 (M.D. Pa. Aug. 25, 2014) ..................... 5 Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 4 of 23 Plaintiffs’ First Amended Complaint was carefully engineered to attempt to avoid the mandatory arbitration provisions contained in the leases between Anadarko E&P Onshore LLC (“Anadarko E&P”) and the Arbitration Plaintiffs.1 Confronted with the fact that Third Circuit precedent preventing parties from taking such obviously strategic steps to avoid arbitration, the Arbitration Plaintiffs make no effort to defend their decision to join Anadarko Petroleum Corporation (“APC” and with Anadarko E&P the “Anadarko Defendants”) or to assert certain claims only against APC and not Anadarko E&P. Instead, the Response attempts to do away with the doctrine of equitable estoppel as a theory for defeating efforts to plead around an arbitration clause. It also conveniently ignores specific allegations in the First Amended Complaint that demonstrate the alleged injuries as to all claims are predicated on alleged royalty underpayments under the leases, bringing the claims squarely within the scope of the arbitration clauses in the leases. The Response also references a “Ninth Cause of Action” for declaratory relief, but no such cause of action was included in the First Amended Complaint. For the reasons stated above and in the Opening Brief, all causes of action brought by the Arbitration Plaintiffs against the Anadarko Defendants are subject to 1 As identified in Anadarko’s Opening Brief at p. 1, four of the Plaintiffs in this matter hold leases containing arbitration provisions. Plaintiffs do not appear to dispute this fact but, instead, make arguments regarding the application of those arbitration provisions to certain claims and defendants. Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 5 of 23 2 mandatory arbitration. Anadarko respectfully asks that the Arbitration Plaintiffs’ claims be compelled to arbitration and stayed. I. The Doctrine of Equitable Estoppel Allows APC to Invoke the Arbitration Clauses in the Leases. In its motion, APC demonstrated that it was entitled to arbitrate the claims against it under the doctrine of equitable estoppel. The Arbitration Plaintiffs have not directly challenged the Anadarko Defendants’ ability to satisfy the two requirements for equitable estoppel discussed in the Opening Brief, but, instead, they argue that the Supreme Court’s 2009 opinion in Arthur Andersen LLP v. Carlisle has made equitable estoppel an unavailable means of compelling arbitration in cases governed by Pennsylvania law. 556 U.S. 624 (2009). That argument has been rejected by both the Third Circuit and multiple federal district courts. The Response ignores this precedent and attempts to muddy a well-settled legal principle that remains crystal clear. Equitable estoppel is alive and well in Pennsylvania. A. The Third Circuit Has Already Held that Equitable Estoppel Is Consistent with Pennsylvania Law. While The Arbitration Plaintiffs are correct that the Supreme Court’s opinion in Arthur Andersen requires federal courts to defer to state court principles that conflict with federal precedent on questions of whether a party can compel arbitration, the Response ignores the critical fact that the Third Circuit has already Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 6 of 23 3 held that equitable estoppel does not conflict with Pennsylvania law and remains available after Arthur Andersen. The Third Circuit reaffirmed equitable estoppel as an available means of compelling arbitration in its 2014 opinion in Griswold v. Coventry First LLC, 762 F.3d 264 (3d Cir. 2014). In Griswold, the Third Circuit outlined how equitable estoppel principles apply to situations involving non-signatories. See 762 F.3d at 272 (quoting E.I. Dupont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates S.A.S., 269 F.3d 187, 199 (3d Cir. 2001)). The Griswold court specifically addressed the impact of Arthur Andersen and held that the Supreme Court did not overrule existing federal precedent “so long as [those opinions] do not conflict with . . . Pennsylvania state law principles.” Id. at 272 n.6 (emphasis added) (citing Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1130 n.5 (9th Cir. 2013) (holding that pre-Arthur Andersen federal decisions consistent with relevant state contract principals remain “good law”) (emphasis added)). The Griswold court then undertook a lengthy discussion of opinions issued before and after Arthur Andersen applying equitable estoppel and noted that a non-signatory is able to compel arbitration with a signatory where the standard test for equitable estoppel is met. Id. at 272–75 (citations omitted). Since the Griswold opinion, numerous federal district courts sitting in Pennsylvania have held that the opinion affirms the viability of equitable estoppel Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 7 of 23 4 in light of Arthur Andersen. See, e.g., Caparra v. Maggiano’s Inc., 2015 WL 5144030, at *8 (E.D. Pa. Sept. 1, 2015) (“Pennsylvania law embraces the theory of equitable estoppel.”); Torres v. CleanNet, U.S.A., 90 F. Supp. 3d 369, 379–81 (E.D. Pa. 2015) (equitable estoppel under Pennsylvania law allowed non-signatory to compel signatory to arbitration); Glenwright v. Carbondale Nursing Home, Inc., Civ. Act. No. 3:16-0926, 2017 WL 1092541 (where Judge Mannion held that the Third Circuit has determined that equitable estoppel is consistent with Pennsylvania law); Colon v. Conchetta, Inc., 2017 WL 2572517, at *5 (E.D. Pa. June 14, 2017) (slip op.) (“Pennsylvania law allows for a theory of equitable estoppel.”); Esis, Inc. v. Coventry Health Care Workers Comp., Inc., 2016 WL 928667, at *8 (E.D. Pa. March 9, 2016) (all citing Griswold); see also Aluminum Bahrain B.S.C. v. Dahdaleh, 17 F.Supp.3d 461, 470 (W.D. Pa. 2014) (applying equitable estoppel test while ultimately holding elements not satisfied). The Third Circuit also applied equitable estoppel in a second case that post-dates Arthur Andersen and involves Pennsylvania. Sanford v. Bracewell & Giuliani, LLP, 618 Fed. Appx. 114, 118 (3d Cir. 2015). Despite citing Griswold elsewhere in the Response, The Arbitration Plaintiffs do not discuss or attempt to distinguish the holding on equitable estoppel but, instead, casually ask this Court to ignore the Third Circuit altogether. Citing Carasquilla v. Mazda Motors Corporation, The Arbitration Plaintiffs argue that in Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 8 of 23 5 deciding whether equitable estoppel is available under Pennsylvania law, “this Court is not strictly bound by any decisions (or dicta) of the Third Circuit.” 197 F.Supp.2d 169, 172-73 (M.D. Pa. 2002). The Carasquilla opinion, however, does not stand for this proposition. In Carasquilla, the court acknowledged existing ambiguity as to whether or not a federal district court was bound by its own court of appeals’ interpretation of state law. Id. at 172. Quoting language from a prior opinion, the court went on to note that “it has been written that a district court is bound by its court of appeals on questions of state law unless ‘later state court decisions indicate that the Court of Appeals’ earlier prediction of state law was in error.’” Id. at 173 (emphasis added) (citing Hittle v. Scripto-Tokai Corp., 166 F.2d 159, 162 (M.D. Pa. 2001)). In Carrasaquilla, the court was faced with a state-court opinion that contradicted the relevant court of appeal’s decision, but here, the Arbitration Plaintiffs do not cite a single Pennsylvania case that rejects equitable estoppel as a means of compelling arbitration. Finally, recent decisions from the Middle District of Pennsylvania have confirmed that absent contrary Pennsylvania Supreme Court precedent, “a district court is bound by a Third Circuit decision where that court has predicted how the Pennsylvania Supreme Court will decide an issue.” Zeglen v. Nw. Mut. Life Ins. Co., No. 3:14-CV-00173, 2014 WL 4215531, at *4 (M.D. Pa. Aug. 25, 2014); Accord Pesotine v. Liberty Mut. Grp., Inc., No. 3:14-CV-784, 2014 WL 4215535, Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 9 of 23 6 at *4 n. 1 (M.D. Pa. Aug. 25, 2014). This rule holds true even if an intermediate state court has issued a conflicting opinion. Only a Pennsylvania Supreme Court opinion that post-dates Griswold and Sanford and rejects equitable estoppel could bar APC from relying on the doctrine. B. The Arbitration Plaintiffs Rely Upon Pennsylvania Authority that Does Not Contradict Existing Federal Precedent. The Pennsylvania Supreme Court authority that the Arbitration Plaintiffs cite does not overrule Griswold or Sanford because it all pre-dates those opinions. See pp. Response, pp. 8-9. As discussed above, Third Circuit precedent is only overruled by a Pennsylvania Supreme Court opinion issued after that authority. 197 F.Supp.2d at 173. Even standing alone, the opinions have virtually nothing to do with equitable estoppel as a means of compelling arbitration. One opinion, Novelty Knitting Mills, Inc. v. Siskind, simply outlines the elements of an affirmative equitable estoppel cause of action. 457 A.2d 502, 503-504 (Pa. 1983) (elements not established in claim seeking to prevent yarn from being removed from a factory based on equitable estoppel). The Arbitration Plaintiffs also argue that the Pennsylvania Supreme Court has barred corporations from “voluntary veil piercing” for their own benefit, but the cited opinions make no such blanket statement, and numerous opinions have pointed to the parent/subsidiary relationship as a classic example of a relationship that can satisfy the “close relationship” element of the test for Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 10 of 23 7 equitable estoppel. Bannett v. Hankin, 331 F. Supp. 2d 354, 360 n. 6 (E.D. Pa. 2004); Bontempo v. Wolpoff & Abramson, 2006 WL 3040905, at *8 (W.D. Pa. Oct. 24, 2009); see also Barletto v. Heuschkel, 21 Pa. D. & C. 5th at 402–03, 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, at *35–36 (equitable estoppel could permit non- signatory company related to signatory to compel arbitration). II. The Relevant Arbitration Provisions Do Not Bar the Application of Equitable Estoppel. In addition to arguing that equitable estoppel is now inconsistent with Pennsylvania law, the Arbitration Plaintiffs also attempt to avoid arbitration by arguing that the relevant arbitration provisions only provide for arbitration of disputes between “Lessor and Lessee” and therefore bar the application of equitable estoppel to a party related to the Lessee such as APC. As a threshold matter, this argument is inconsistent with federal precedent from courts within the Third Circuit applying Pennsylvania law, and the only cases cited by the Arbitration Plaintiffs that actually discuss arbitration language in the context of equitable estoppel emphasize that their holdings are based on the precedent of other states. Moreover, the Arbitration Plaintiffs’ argument ignores the fact that all of the claims are properly characterized as disputes between “Lessor and Lessee,” regardless of whether the Arbitration Plaintiffs unilaterally and artfully omitted the lessee, Anadarko E&P, from a particular count in the First Amended Complaint. Finally, even if the Arbitration Plaintiffs could overcome these fatal defects in the Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 11 of 23 8 Arbitration Plaintiffs’ argument, they ignore the fact that some of the Arbitration Plaintiffs hold leases with arbitration provisions that do not contain the “Lessor and Lessee” language at all, while others that do also contain supplemental provisions that expand the scope of that language. A. Federal Precedent Applying Pennsylvania State Law Allows a Non-Signatory to Invoke an Arbitration Clause Under an Equitable Estoppel Theory When the Clause Covers Disputes “Between” the Parties to the Agreement. As demonstrated above, after Arthur Andersen, federal courts resolve questions regarding whether a particular party can compel arbitration by looking to state law. The federal courts applying Pennsylvania law since Arthur Andersen have treated equitable estoppel as an available means of compelling arbitration even if the arbitration provision covers disputes “between the parties” or has language to that effect. For example, in Caparra, an Eastern District of Pennsylvania court held that a non-signatory could compel arbitration of claims brought against it by a signatory. 2015 WL 5144030, at *8. The arbitration provision in that case specifically provided for the “resolution of all disputes that arise between” the two signatories to the contract. Id. at *2. As another example, in Colon, an Eastern District court again allowed a non- signatory to compel arbitration where the arbitration provision stated that “[t]his provision’s purpose is to ensure than an arbitration—not a court—will decide ALL Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 12 of 23 9 . . . claims between the Parties.” 2017 WL 2572517, at *3-4 (E.D. Pa. June 14, 2017). The court noted that it would be “completely inequitable to disallow the non-signatories from compelling arbitration in light of [Plaintiff’s] allegations of collective wrongdoing by Defendants.” This important point from Colon distinguishes all of the federal authorities relied on by the Arbitration Plaintiffs. In this case, all of the claims the Arbitration Plaintiffs assert against APC are properly characterized as a dispute between “Lessor and Lessee.” One of the antitrust claims is asserted jointly against both APC and Anadarko E&P and indisputably reflects a dispute between Lessor and Lessee. The fact that APC is also joined as a defendant does not change that fact. As to the antitrust and RICO claims asserted against APC but not Anadarko E&P, the Arbitration Plaintiffs’ unilateral decision to join only APC in those claims does not change the fact—clearly shown on the face of the First Amended Complaint— that those claims are properly characterized as a dispute between Lessor and Lessee. As shown in the Anadarko Defendants’ Opening Brief and as discussed in detail in Section III, infra, all of the federal claims are predicated on actions allegedly taken in obtaining and performing the oil and gas leases—leases that Anadarko E&P, the lessee, obtained and performed. Just as the court in Colon held that “allegations of collective wrongdoing by Defendants” allowed a non-signatory to invoke arbitration under an arbitration Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 13 of 23 10 clause covering disputes between the parties to the agreement, the Arbitration Plaintiffs’ allegations of collective wrongdoing by APC and Anadarko E&P allow APC to invoke the arbitration clause in the leases covering disputes between “Lessor and Lessee.” The Arbitration Plaintiffs’ unilateral decision to name APC as a defendant, but not Anadarko E&P, in three of the counts in the First Amended Complaint, does not change the proper characterization of all of the claims against the Anadarko Defendants as disputes between Lessor and Lessee. The only opinion applying Pennsylvania law relied upon by the Arbitration Plaintiffs in support of their argument is Elwyn v. Deluca, but that Pennsylvania Superior Court opinion makes no mention of equitable estoppel. 48 A.3d 457, 463. The holding also relies upon the fact that the claim against the non-signatory was based on an extra-contractual duty that had no relation to the agreement containing the arbitration provision. Here, the claims against APC are inextricably intertwined with the leases and Anadarko E&P’s alleged actions in obtaining and performing those leases. The federal opinions cited by the Arbitration Plaintiffs that actually discuss the availability of equitable estoppel when arbitration provisions limit disputes to those between the parties are outside the Third Circuit and explicitly rely on Florida and California law. See Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., 845 F.3d 1351, 1355-56 (11th Cir. 2017) (citing numerous Florida Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 14 of 23 11 cases in holding that the Kardashians needed to be considered “parties” to the agreement to invoke equitable estoppel); Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042 (2009). Those cases did not involve “allegations of collective wrongdoing by Defendants” who were affiliates, one of whom was a party to the agreement, like Colon and this case. Whatever import these holdings might have in Florida and California in such a case, Pennsylvania federal authority permits APC to invoke the arbitration clauses in the leases on the facts of this case. B. Some of the Arbitration Plaintiffs Do Not Have Arbitration Provisions that Limit Arbitration to Disputes between Lessor and Lessee. The Arbitration Plaintiffs’ argument that the arbitration provisions bar equitable estoppel by limiting arbitration to disputes between Lessor and Lessee also ignores the actual language of the Arbitration Plaintiffs’ leases. Arbitration Plaintiff Donald Knolles holds a lease that simply provides, “[a]ny questions concerning this lease or performance there under shall be ascertained and determined by three disinterested arbitrators.” Opening Brief, Ex. 4, at p. 6. All but one of the remaining Arbitration Plaintiffs have leases that refer to arbitration between Lessor and Lessee in the body of the lease but also contain addenda that expand the scope of those provisions. Specifically, the leases of some of the Arbitration Plaintiffs have addenda providing that “any questions concerning Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 15 of 23 12 this lease or performance there under shall be ascertained and determined by three disinterested arbitrators.” Opening Brief, Exs. 2-3 at p. 6. Regardless of this Court’s decision addressing the impact of “between the parties” language on the availability of equitable estoppel under Pennsylvania law, APC is entitled to invoke arbitration as to the leases that do not contain any such limitation on the scope of arbitrable claims. III. The Arbitration Plaintiffs’ Antitrust and RICO Claims As Pleaded Rely Upon the Leases. The Arbitration Plaintiffs have also attempted to avoid the arbitration provision in their leases by bringing federal statutory claims for antitrust and RICO violations against non-signatory APC but not Anadarko E&P, the signatory to the leases. In addition to strategically bringing these federal claims against only APC and other non-signatory defendants—a decision the Response makes no effort to defend as anything other than a ploy to avoid arbitration—the Arbitration Plaintiffs have also attempted to recast the antitrust and RICO claims raised in the Amended Complaint as claims that have nothing to do with the leases. Of course, the Arbitration Plaintiffs are bound by the allegations of the Amended Complaint, and the federal precedent cited in the Response demonstrates that arbitration cannot be avoided where, as here, the federal statutory claims allege harm and rely upon rights arising out of contracts containing arbitration provisions. Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 16 of 23 13 As discussed in Anadarko’s Opening Brief, the Arbitration Plaintiffs are all Parties to leases with mandatory arbitration provisions, and identical or highly similar iterations of those provisions have been held to be broad by courts in this district. See Opening Brief, at p. 10. The Amended Complaint repeatedly demonstrates that the antitrust and RICO claims “concern” the leases and Anadarko E&P’s performance thereunder. Anadarko’s Opening Brief cites to the numerous instances in the Amended Complaint where the Arbitration Plaintiffs claim that the alleged antitrust and RICO violations resulted in the terms of the leases not providing for higher royalty rates, better signing bonuses, or other more favorable lease terms. See Opening Brief at pp. 8-9. The Arbitration Plaintiffs also argue that Anadarko E&P’s performance of the leases was impacted by the antitrust and RICO violations through allegedly increased deductions for post-production services. Id. At the most basic level, the Arbitration Plaintiffs’ federal claims allege that the Defendants’ antitrust and RICO violations caused the Arbitration Plaintiffs to receive less money than they otherwise would have from the relationship created by the leases. In the face of the obvious link between these federal statutory claims and the leases, the Response attempts to shift the focus of the claims away from alleged underpayments and bad contract terms toward supposed harm to the broader Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 17 of 23 14 market, but this pivot cannot change the allegations of the Amended Complaint that necessarily rely upon the Leases. Essentially, the Arbitration Plaintiffs are arguing that because the alleged antitrust and RICO violations would have inflicted harm on landowners in the geographic area who did not have leases, the claims do not really “concern” the leases at all. Whatever claim a hypothetical landowner who does not hold a lease might have, these Plaintiffs have not brought a claim based on harm to landowners without leases—an evaluation of the antitrust and RICO claims as pleaded plainly demonstrates reliance on, and repeated reference to, the terms of the leases and their performance. The Arbitration Plaintiffs also point to cases where antitrust claims were not ordered to arbitration, in an attempt to show that such claims are rarely within the scope arbitration provisions. But the cases cited only highlight the difference between an arbitrable antitrust claim—like the ones brought here—and a non- arbitration claim that is brought without reference to any contract. In Coors Brewing Co. v. Molson Breweries, the Tenth Circuit held that the Coors-Molson arbitration clause could cover antitrust claims unless those claims were not “related to the licensing agreement” containing the arbitration provision. 51 F.3d 1511, 1513 (10th Cir. 1995). The Tenth Circuit based its holding on Supreme Court authority that antitrust claims are arbitrable when those claims have Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 18 of 23 15 a “reasonable factual connection” to the contract containing the provision. Id. (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 617 (1985)). In Coors, there was no reasonable factual connection between the contract and one of the antitrust claims because the contract containing the arbitration provision was an agreement between Coors and Molson, a Canadian brewer, and the antitrust claim alleged harm for Coors only due to its participation in the North American brewing industry—not based on its contractual relationship with Molson. Coors, 51 F.3d at 1513, 1517. A similar distinction is drawn in the Academy of Medicine v. Aetna Health, Inc. case cited by the Arbitration Plaintiffs, where the Supreme Court of Ohio refused to order an antitrust claim to arbitration because “the allegations [at issue] did not even presume the existence of [the agreement containing the arbitration provision].” 108 Ohio St. 3d 185, 187 (Ohio 2006). Here, there is no doubt that the antitrust and RICO claims share a “reasonable factual connection” with the leases exactly because the harm alleged flows from those leases. The Arbitration Plaintiffs also cite to other cases outside the antitrust context, but the courts in those cases refused to order claims to arbitration where the existence of a contract between the parties was merely “fortuitous” in relation to the claim being brought. See, e.g., Estate of Stiles v. Chesapeake Appalachia, LLC, 2014 Pa. Super. Unpub. LEXIS 3037, at *12 (Pa. Super. Ct. June 17, 2014) Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 19 of 23 16 (trespass, negligence, and nuisance claims based on damage to nearby property non-arbitrable because they are “wholly incidental to the alleged cause of action.”). The claims as pleaded are inextricably interwoven with the obligations and performance of the leases, and this necessarily makes the claims arbitrable under the broad provisions of the leases. IV. The Arbitration Plaintiffs’ Ninth Cause of Action Improperly Asks this Court to Overrule the AAA on a Decision of Arbitration Procedure. The Response references a Ninth Cause of Action for declaratory relief. The First Amended Complaint raises no such cause of action, and the Arbitration Plaintiffs cannot seek a declaratory judgment based on a responsive pleading, making the arguments in the Response moot. All of the causes of action actually alleged against the Anadarko Defendants by the Arbitration Plaintiffs are subject to arbitration, and Anadarko asks that this Court compel arbitration and stay those claims pending arbitration. Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 20 of 23 17 McQUAIDE BLASKO, INC. Dated: June 27, 2017 By: s/John A. Snyder John A. Snyder, Esquire I.D. No. 66295 jasnyder@mqblaw.com 811 University Drive State College, PA 16801 (814) 238-4926 Fax: (814) 234-5620 VINSON & ELKINS, LLP Guy S. Lipe TX I.D. No. 12394600 glipe@velaw.com 1001 Fannin Street, Suite 2500 Houston, TX 77002-6760 (713) 758-1109 Attorneys for Defendants Anadarko Petroleum Corporation and Anadarko E&P Onshore LLC, f/k/a Anadarko E&P Company LP Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 21 of 23 18 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA KYLIE E. AHERN, a/k/a KYLIE E, PERRY and MATTHEW J. AHERN, et al., Plaintiffs, vs. CHESAPEAKE ENERGY CORPORATION, et al., Defendants. : : : : : : : : : Case No. 4:16-cv-01347-MWB Judge Matthew W. Brann Complaint filed: 06/28/16 Electronically Filed CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of Defendants Anadarko’s Reply Brief in the above-captioned matter was served this 27th day of June, 2017, to the attorneys/parties of record via electronic filing as follows: Christopher D. Jones, Esquire Griffin, Dawsey, DePaola & Jones, P.C. 101 Main Street Towanda, PA 18848 chris@gddj-law.com 570-265-2175 (for Plaintiffs) Taunya M. Rosenbloom, Esquire P.O. Box 309 332 South Main Street Athens, PA 18810 taunya@tkrlaw.com 570-888-0660 (for Plaintiffs) Thomas S. McNamara, Esquire Indik & McNamara, P.C. 100 South Broad Street, Suite 2230 Philadelphia, PA 19110 tmcnamara915@gmail.com 215-567-7125 (Plaintiffs) John K. Gisleson, Esquire Matthew H. Sepp, Esquire Morgan Lewis & Bockius, LLP One Oxford Centre, 32nd Floor Pittsburgh, PA 15219-6401 jgisleson@morganlewis.com msepp@morganlewis.com 412-560-3300 (Def. Mitsui E&P USA LLC) Seamus C. Duffy, Esquire Kathryn E. Deal, Esquire Drinker Biddle & Reath LLP One Logan Square, Suite 2000 Philadelphia, PA 19103 seamus.duffy@dbr.com Kathryn.deal.@dbr.com (215) 988-2700 (Defs. Chesapeake) John S. Summers, Esquire Hankgley, Aronchick, Segal, Pudlin & Schiller One Logan Square, 27th Floor Philadelphia, PA 19103 jsummers@hangley.com 215-496-7007 (Defs. William Partners LP, Access MLP Operating, LLP and Appalachia Midstream Services, LLC and as co-counsel for Defs. Chesapeake) Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 22 of 23 19 Michael J. Gibbens, Esquire Susan E. Huntsman, Esquire Crowe & Dunlevy 321 S. Boston Avenue, Suite 500 Tulsa, OK 74103 (918) 592-9800 Pro Hac Vice (Defs. William Partners LP, Access MLP Operating, LLP and Appalachia Midstream Services, LLC) McQUAIDE BLASKO, INC. By: s/John A. Snyder John A. Snyder, Esquire I.D. No. 66295 jasnyder@mqblaw.com 811 University Drive State College, PA 16801 (814) 238-4926 Fax: (814) 234-5620 Attorneys for Defendants Anadarko Petroleum Corporation and Anadarko E&P Onshore LLC, f/k/a Anadarko E&P Company LP Case 4:16-cv-01347-MWB Document 74 Filed 06/27/17 Page 23 of 23 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA KYLIE E. AHERN, a/k/a KYLIE E, PERRY and MATTHEW J. AHERN, et al., Plaintiffs, vs. CHESAPEAKE ENERGY CORPORATION, et al., Defendants. : : : : : : : : : Case No. 4:16-cv-01347-MWB Judge Matthew W. Brann Complaint filed: 06/28/16 Electronically Filed CERTIFICATE OF COMPLIANCE with Local Rule 7.8(b)(2) I, John A. Snyder, attorney for Defendants Anadarko, hereby certify that Defendants Anadarko’s Reply Brief contains 3,665 words, and is in compliance with Middle District Local Rules. Respectfully submitted, Dated: June 27, 2017 s/John A. Snyder John A. Snyder PA I.D. No. 66295 McQUAIDE BLASKO, INC. 811 University Drive State College, PA 16801 Tel: (814) 238-4926 E-mail: jasnyder@mqblaw.com Attorneys for Defendants, Anadarko Petroleum Corp. and Anadarko E&P Onshore LLC Case 4:16-cv-01347-MWB Document 74-1 Filed 06/27/17 Page 1 of 1 Aurra Fellows Cited As of: June 27, 2017 9:52 PM Z Barletto v. Heuschkel Common Pleas Court of Lawrence County, Pennsylvania February 7, 2011, Decided NO. 10606 of 2010, C.A. Reporter 2011 Pa. Dist. & Cnty. Dec. LEXIS 318 *; 21 Pa. D. & C.5th 376 ** CHARLES BARLETTO, Plaintiff, VS. MARK HEUSCHKEL, FERROTECH CORPORATION, FERROMET CORPORATION, and FERROTECH REALTY, LLC, Defendants. Core Terms arbitration, non-signatory, arbitration clause, parties, signatory, arbitration agreement, alleges, obligations, profits, counts, duties, Industrial, equitable estoppel, preliminary objection, superior court, twenty-five, disputes, entities, deeded, nexus, contractual obligation, minority shareholder, alleged breach, defamation, affiliate, sister corporation, license agreement, fiduciary duty, filing claim, new business Case Summary Overview Traditional contract theories of agency and estoppel compelled a signatory to an arbitration agreement to arbitrate at the insistence of non-signatories, who were the agents or affiliates of a signatory, where the claims and positions of all parties were intimately founded on and intertwined with the underlying contractual obligations found in the agreement. Each of the nine counts in the complaint arose directly out of or related back to the duties and obligations contained within the agreement or the breach of said duties and obligations and, therefore, were subject to arbitration. Outcome Preliminary objection raising lack of subject matter granted. Parties directed to submit dispute to arbitration. Proceedings stayed until conclusion of arbitration. Remaining preliminary objections overruled as moot. LexisNexis® Headnotes Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > General Overview HN1[ ] Alternative Dispute Resolution, Arbitration Pursuant to Pa.R.C.P. No. 1028(a)(6), a party may raise by preliminary objections an agreement for alternative dispute resolution. A court is required to sustain preliminary objections raising an agreement for alternative dispute resolution, if the court finds as a matter of law that the dispute falls within the ambit of a contractual arbitration provision. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN2[ ] Arbitration, Arbitrability Arbitration clause that states that "any and all disputes, controversies, or claims arising out of or relating to this Agreement or for the breach or validity of any term or provision of this Agreement, shall be resolved by final and binding arbitration" is an unlimited arbitration clause and any claims implicating the contract can be compelled to arbitration. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN3[ ] Arbitration, Arbitrability Pennsylvania case law supports the notion that non- signatory agents, parent corporations, or sister corporations may enforce arbitration clauses when the interests of the parties overlap or are closely linked. Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 1 of 12 Page 2 of 12 Aurra Fellows Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN4[ ] Arbitration, Arbitrability Arbitration is contractual by nature and absent an agreement between the parties to arbitrate an issue, they cannot be compelled to arbitrate. As a matter of public policy, courts of the Pennsylvania favor agreements to arbitrate and such agreements will be found valid, enforceable and irrevocable save for grounds that exist at law or in equity that relate to the validity, enforceability, or revocation of any contract. When a party to an agreement is attempting to prevent another from proceeding to arbitration, the court must apply a two part test. The court must first determine whether a valid agreement to arbitrate exists between the parties, and if so, determine whether the dispute involved is within the scope of the arbitration provision. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN5[ ] Arbitration, Arbitrability Five traditional theories arising out of common law principles of contract and agency can bind non- signatories to arbitration agreements. The theories are: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) equitable estoppel. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability Business & Corporate Law > ... > Authority to Act > Contracts & Conveyances > Liability of Agents HN6[ ] Arbitration, Arbitrability Non-signatories can enforce an arbitration agreement where there is an obvious and close nexus between the non-signatories and the contract or contracting parties. One instance in which such an obvious and close nexus exists is the relationship between a principal and an agent. Under traditional agency theory, an agent is subject to contractual provisions entered into by the principal. Therefore, because a principal is bound under the terms of a valid arbitration clause, its agents, employees, and representatives are also covered under the terms of such agreements. Business & Corporate Law > Agency Relationships > Establishment > General Overview HN7[ ] Agency Relationships, Establishment In Pennsylvania, agency is defined as the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act. The relationship necessary to create an agency does not depend on the intent of the parties to create it, nor their belief that they have done so. What is necessary to create the relation is an agreement between the parties, which need not be contractual, that results in the factual relation to which the legal consequences of an agency are attached. This is the case even if the parties did not call the relationship an agency or did not intend for an agency to exist. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN8[ ] Arbitration, Arbitrability Arbitration agreements may be upheld against non- signatories where their interests are directly related to, if not congruent with a signatory. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN9[ ] Arbitration, Arbitrability Where parties unmistakably intend to arbitrate all controversies which might arise between them, their agreement should be applied to claims against agents or entities related to the signatories. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN10[ ] Arbitration, Arbitrability A non-signatory parent company may enforce an arbitration clause to which its subsidiary is a signatory. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *318; 21 Pa. D. & C.5th 376, **376 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 2 of 12 Page 3 of 12 Aurra Fellows HN11[ ] Arbitration, Arbitrability Non-signatory third party beneficiaries may fall within the scope of an arbitration clause if that was the signing parties' intent. An arbitration agreement would be of little value if a party could obviate the effect of the agreement merely by finding a way to join another party. In no event can an arbitration clause be defeated by adding a party to the complaint. Signatories to the arbitration agreement should not be able to avoid the requirement to arbitrate by a non-signatory when the non-signatory wants to arbitrate. This is especially the case when a non-signatory parent company wishes to enforce the arbitration agreement the signatory party is attempting to avoid. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability Contracts Law > ... > Estoppel > Equitable Estoppel > General Overview HN12[ ] Arbitration, Arbitrability Equitable estoppel is an appropriate method by which non-signatories to arbitration agreements may compel signatories to arbitrate their claims. Three factors compel a signatory to an arbitration agreement to arbitrate with a non-signatory at the non-signatory's insistence. Signatories are bound to arbitrate because of (1) the close relationship between the entities involved in the disputes; (2) the relationship of the alleged wrongs to the non-signatory's obligations and duties found in the contract; and (3) because the claims involved in the disputes were intimately founded in and intertwined with underlying contractual obligations. Of the three factors, the third factor, whether the claims are intimately founded in and intertwined with underlying contractual obligations is the most important. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability Contracts Law > ... > Estoppel > Equitable Estoppel > General Overview HN13[ ] Arbitration, Arbitrability For equitable estoppel to be applicable to compel arbitration, an examination of the nature of the claims being asserted must be conducted to determine if the claims fall within the scope of the agreement and therefore compel the signatory to arbitrate. Therefore, the focus of the inquiry should be on the nature of the underlying claims asserted by the plaintiff against the defendant to determine whether those claims fall within the scope of the arbitration clause contained in the agreement. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN14[ ] Arbitration, Arbitrability It is well established in Pennsylvania that when parties to a contract have included a broad arbitration clause in an agreement, disputes arising out of the contractual relationship must, when requested, be arbitrated. Doubts as to whether an arbitration clause covers a particular dispute should be resolved in favor of arbitration. Business & Corporate Compliance > ... > Alternative Dispute Resolution > Arbitration > Arbitrability HN15[ ] Arbitration, Arbitrability Traditional contract theories of agency and estoppel compel a signatory to the agreement to arbitrate at the insistence of non-signatory defendants who are the agents or affiliates of the signatory to the agreement when the claims and positions of all parties are intimately founded on and intertwined with the underlying contractual obligations found in the agreement. In short, a plaintiff cannot have it both ways. It cannot rely on a contract when it works to its advantage, and repudiate it when it works to its disadvantage. Counsel: [*1] For Plaintiff: Robert O. Lampl, Esquire, James R. Cooney, Esquire, Elsie R. Lampl, Esquire, Pittsburgh PA. For Defendant: Mark A. Willard, Esquire, Stuart Kaplan, Esquire, Audrey K. Kwak, Esquire, Eckert, Seamans, Cherin & Mellot, LLC, Pittsburgh, PA. Judges: Dominick Motto, President Judge. Opinion by: Dominick Motto Opinion [**403contd] 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *318; 21 Pa. D. & C.5th 376, **376 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 3 of 12 Page 4 of 12 Aurra Fellows [EDITOR'S NOTE: The page numbers of this document may appear to be out of sequence; however, this pagination accurately reflects the pagination of the original published document.] ORDER OF COURT AND NOW, this 7th day of February, 2011 in accordance with the accompanying opinion of even date herewith, it is ORDERED and DECREED as follows: 1. Defendant's First Preliminary objection raising lack of Subject Matter Jurisdiction pursuant to Pa.R.C.P. § 1028(a)(6) and the Pennsylvania uniform Arbitration Act is GRANTED. 2. The parties are directed to submit their dispute, as set forth in the Complaint, to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. 3. All further proceedings in this matter are STAYED pending the conclusion of arbitration. [**404] 4. All remaining Preliminary Objections are OVERRULED as rendered MOOT by this Order. By the Court: /s/ Dominick Motto, P.J. Dominick Motto President Judge [**378] OPINION MOTTO, P.J. Before the Court for disposition are preliminary objections filed on behalf of Defendants Mark Heuschkel ("Heuschkel"), [*2] Ferrotech Corporation ("Ferrotech"), Ferromet Corporation ("Ferromet"), and Ferrotech Realty, LLC ("Ferrotech Realty") in response to the complaint of Plaintiff Charles Barletto ("Barletto"). Defendants contend that the Asset Purchase Agreement ("APA") at the heart of this dispute contains a broad arbitration clause which compels any and all disputes arising out of the APA be resolved through arbitration. Plaintiff argues that because three of the four defendants are non-signatories to the agreement, arbitration is not the proper venue for disposition of his claims and the Court must hear the matter. After argument on the preliminary objections and reviewing applicable case [**379] law and the well argued briefs submitted by the parties, the Court sustains Defendants' preliminary objections for dismissal based on jurisdictional grounds. The Plaintiff in the action before the Court today is Charles Barletto, a self-averred "experienced businessman" who ran a number of scrap-metal processing enterprises. The primary Defendant, Mark Heuschkel, was also involved in the scrap-metal processing business and was a customer of Barletto's. Barletto owned three separate businesses associated with the [*3] scrap-metal industry, those being Barletto Equipment and Construction Company, Industrial Concerns, and Barletto Corporation. Defendant Heuschkel's business, known as Ferromet, also a defendant in the present action, sent much of its scrap- steel to Barletto Corporation to be processed. In 2005, Barletto and Heuschkel entered into negotiations for the sale of Barletto Corporation and Barletto Equipment, and for a lease on the property owned by Industrial concerns to a new company Heuschkel had founded, Ferrotech, which is also a defendant in the current action. The heart of the dispute between the parties rests on the rights and obligations contained within the APA that effectuated the sale. Under the Agreement, Ferrotech agreed to employ Barletto as a consultant and to provide Barletto with twenty-five percent of the voting stock of Ferrotech. In order for Barletto to receive his twenty-five percent of the shares, there were several obligations he had to satisfy. The obligations included delivery of the fully executed sublease to the property owned by Industrial Concerns, the transfer of a Dust Collection Permit, the attachment of the Seller's financial statements to the agreement, [*4] the full [**380] release of any and all claims and/or liens on the purchased assets, and a receipt of Revenue Notice. After the execution of the APA, Ferrotech became a highly profitable business. Barletto believes that as an alleged minority shareholder he was entitled to share in the profits. Barletto avers that Heuschkel informed him he was not entitled to share in the profits, and that Heuschkel routinely refused to allow Barletto any share of the profits earned by Ferrotech. Barletto alleges in his complaint that Heuschkel, in an attempt to keep the profits from Barletto, funneled the profits to Ferromet, the parent corporation of Ferrotech. In 2008, it became necessary for the parties to refinance the mortgage on the facility Ferrotech leased from Industrial Concerns, Inc. In order to receive the 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *1; 21 Pa. D. & C.5th 376, **376 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 4 of 12 Page 5 of 12 Aurra Fellows refinancing, Heuschkel informed Barletto that the property owned by industrial Concerns would have to be deeded over to Ferrotech. On June 24, 2009 the parties executed the document that Barletto believed would deed the property from Industrial Concerns to Ferrotech. In actuality, the document deeded the property from industrial Concerns to Ferrotech Realty, another new corporation formed by Heuschkel [*5] and the final defendant in the current action. Barletto alleges in his complaint that his signature on the 2009 Agreement was procured through means of duress and fraud. Specifically Barletto alleges that when he was told he had to sign the document, he was unaware that the document was an agreement between the parties, and that when he asked to review the document Heuschkel refused to allow him and threatened Barletto with termination if [**381] he did not sign. Plaintiff alleges that he only signed the 2009 Agreement and deeded over the property owned by Industrial concerns after he was given assurances by Heuschkel that he would still own twenty-five percent of the property as he was the owner of twenty-five percent of the stock of Ferrotech. Defendant Heuschkel avers that because Plaintiff failed to fulfill his obligations under the original APA, Plaintiff never became a minority stockholder in Ferrotech. In October of 2009 the business relationship between Barletto and Heuschkel ended. On or about October 30, Barletto was in the offices of Ferrotech and a confrontation between himself and Heuschkel occurred. As a result of the confrontation, Barletto was fired from the employ of Ferrotech. [*6] Upon his termination, Barletto inquired into his position as minority shareholder in Ferrotech. Barletto alleges that he was informed his stock was worthless and all of the assets of Ferrotech were owned by Ferromet or Ferrotech Realty. Barletto was then frozen out of the business and corporate affairs of Ferrotech, which Barletto believes deprived him of his rights as a shareholder. As a result of his termination from Ferrotech, Barletto started a new business. Since the start of his new business, Barletto alleges that Heuschkel has engaged in a campaign of defamation, trade libel, and interference with contractual relations. Barletto alleges that Heuschkel has contacted customers and potential customers of Barletto's and informed them that Barletto is a "crack addict", sleeps with "crack whores", is not fit to be in business, is unreliable, and is a "liar" and "thief" who cannot be trusted. Barletto [**382] claims that these statements allegedly made by Heuschkel have had a "serious and deleterious impact" upon his new business. Based on the above mentioned facts, Barletto has instituted the current action before the Court today. HN1[ ] Pursuant to Pa.R.C.P. § 1028(a)(6), a party may raise by preliminary [*7] objections an agreement for alternative dispute resolution. A court is required to sustain preliminary objections raising an agreement for alternative dispute resolution, if the court finds as a matter of law that the dispute falls within the ambit of a contractual arbitration provision. Shadduck v. Christopher J. Kaclik, Inc., 713 A.2d 635, 639 (Pa. Super. 1998). In filing his complaint before the Court, Plaintiff attempts to avoid the arbitration clause contained within the APA. Plaintiff initially alleged that he was not a signatory to the agreement and therefore could not be compelled to arbitrate. Careful examination of the agreement, however, reveals that Plaintiff is a signatory to the agreement. Barletto is directly listed as a party to the agreement, rights and obligations of Barletto are found throughout the agreement, and on the signature page Barletto signed as an individual party to the agreement. The record clearly establishes that Barletto is a signatory and party to the APA. The arbitration clause contained within the Agreement states that, "any and all disputes, controversies, or claims arising out of or relating to this Agreement or for the breach or validity of any [*8] term or provision of this Agreement, shall be resolved by final and binding arbitration." Pennsylvania appellate case law considering [**383] similarly worded HN2[ ] clauses have held that such clauses are unlimited arbitration clauses and any claims implicating the contract can be compelled to arbitration. Dodds v. Pulte Home Corporation, 2006 PA Super 268, 909 A.2d 348, 351 (Pa. Super. 2006) (Arbitration clause that read "Any controversy, claim, or dispute arising out of or relating to this Agreement" compels arbitration of fraud claims); Smay v. Stuebner, Inc., 2004 PA Super 493, 864 A.2d 1266, 1276 (Pa. Super. 2004) (Arbitration clause that read "Any controversy or Claim arising out of or related to the Contract," interpreted broadly to include all claims arising from the contract regardless of whether the claim sounds in tort or contract.) The arbitration clause at issue before the Court is equally as broad as those found in Dodds and Smay and thus any disputes arising out of or relating to the APA or the validity or breaches of contractual obligations and duties contained therein may be compelled to arbitration. An examination of the nine counts of Plaintiff's complaint reveals that all 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *4; 21 Pa. D. & C.5th 376, **380 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 5 of 12 Page 6 of 12 Aurra Fellows counts arise out of or relate back to the [*9] APA or its breach. Count One of the complaint is against Defendant Heuschkel for breach of contract. Plaintiff alleges that various actions committed by Heuschkel constitute repeated breaches of the APA. Plaintiff avers that the first alleged breach occurred when Heuschkel refused to recognize the twenty-five percent interest in Ferrotech that Barletto believed he was entitled to under the agreement. The second alleged breach occurred when Barletto was terminated from Ferrotech despite the twenty-five percent interest he believed he held in the company. Plaintiff claims the third breach came as a result of Heuschkel's failure to share the profits earned by Ferrotech with Barletto since [**384] the date of the agreement. The final alleged breach is for the deprivation of salary and benefits Barletto felt he was entitled to receive under the "consulting Agreement" agreed upon by the parties when signing the agreement. All of the claims in count One of the complaint arise out of the terms of the APA and the alleged breach of those terms. In Count Two of the complaint, Barletto alleges that Heuschkel breached the fiduciary duty owed to Barletto as a minority shareholder. Plaintiff claims that Heuschkel, [*10] as a majority shareholder, owed Plaintiff a fiduciary duty to not exclude Plaintiff from his "proper share of benefits accruing from the enterprise." Plaintiff alleges that Heuschkel breached his fiduciary duty by refusing to allow Barletto to participate in the profits earned by Ferrotech and for terminating Barletto despite his holding a twenty-five percent interest in the company. The alleged breach of fiduciary duty by Heuschkel arises directly out of the obligations of the parties found within the APA. Count Three of the complaint is against Defendant Heuschkel for alleged corporate oppression of a minority shareholder. This Count also arises directly out of the terms of the original APA. Barletto bases this Count of the Complaint on 15 Pa.C.S. 1767(a)(2) and avers that the breach of fiduciary duty by Heuschkel alleged in Count Two also constitutes corporate oppression of a minority shareholder. In Count Four of the complaint, Plaintiff brings claims against Heuschkel, Ferrotech, and Ferromet for fraud. Barletto alleges that the promise by Heuschkel of a [**385] twenty-five percent interest in Ferrotech was a significant inducement for Barletto in signing the APA. Plaintiff alleges further [*11] that Heuschkel's representations that Ferrotech would earn substantial profits that would be split between Heuschkel and Plaintiff was additional inducement for Plaintiff's entering into the APA. In his complaint, Plaintiff avers that Ferrotech did indeed earn substantial profits, but Plaintiff was excluded in the sharing of the profits as a result of Heuschkel's funneling the profits made by Ferrotech into Ferromet for the purpose of preventing Plaintiff from receiving his rightful share of the profits. This count arises directly out of alleged violations of the duties and obligations contained within the APA. The Fifth Count of Plaintiff's Complaint is for an accounting of the profits earned by Ferrotech. This count is against Defendants Heuschkel, Ferrotech, and Ferromet and also arises directly from rights and obligations of the parties found within the APA. Plaintiff asserts that as a result of the alleged fraud perpetrated by the Defendants in the previous count, he is entitled to an accounting of all the profits earned by Ferrotech from the date of the APA until the present date, as well as accountings of any transfers Ferrotech may have made to Ferromet. The sixth and Seventh [*12] Counts of Plaintiff's Complaint are for fraud against Defendants Heuschkel and Ferrotech Realty, LLC and for rescission against the same. These counts of the Complaint arise directly from the lease agreement contained in the APA. Plaintiff alleges that he was fraudulently induced to deed the property owned by Industrial Concerns to Ferrotech Realty when the parties refinanced the property in 2008. [**386] The Eighth and Ninth Counts of the Complaint are against Defendant Heuschkel for defamation/trade libel and intentional interference with contractual relations. These counts originated with Heuschkel's alleged breach of the APA forcing Barletto to start a new business. Barletto alleges that since he started his new business, Heuschkel has participated in a campaign of defamation and trade libel against him. Plaintiff alleges that this campaign has intentionally interfered with his current and potential customers. In the nine counts filed by Plaintiff, multiple defendants have been named. Defendant Heuschkel has been named individually as defendant in each count. At Counts Four and Five, Ferromet and Ferrotech have also been included as defendants, and at Counts Six and Seven, Ferrotech Realty [*13] is included as a defendant, while four separate parties are involved as defendants in the complaint, the close relationship between the four parties renders their individual 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *8; 21 Pa. D. & C.5th 376, **383 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 6 of 12 Page 7 of 12 Aurra Fellows interests intricately linked. Of the four defendants, only Ferrotech is a signatory to the APA, and based on this fact Barletto avers that he cannot be compelled to arbitration. HN3[ ] Pennsylvania case law, however, supports the notion that non-signatory agents, parent corporations, or sister corporations may enforce arbitration clauses when the interests of the parties overlap or are closely linked. Dodds v. Pulte Home Corporation, 2006 PA Super 268, 909 A.2d 348, 351-352 (Pa. Super. 2006). Defendant Heuschkel is the president and owner of Ferrotech, and as such he is the agent through which Ferrotech, a corporation and creature of legal fiction, must [**387] act. Ferromet is the parent company of both Ferrotech and Ferroteeh Realty. Defendant Heuschkel is the owner of all three corporate defendants, and all of the charges against the corporate defendants stem directly from Heuschkel's conduct as the owner and president of the corporations. For the reasons that follow this Court finds that Plaintiff Barletto is compelled to arbitrate all his claims [*14] at the insistence of the non-signatory defendants. HN4[ ] Arbitration is contractual by nature and it is well established that absent an agreement between the parties to arbitrate an issue, they cannot be compelled to arbitrate. Hoffman v. Gekoski, 250 Pa. Super. 49, 378 A.2d 447 (Pa. Super. 1977). As a matter of public policy, courts of the Commonwealth favor agreements to arbitrate and such agreements will be found valid, enforceable and irrevocable save for grounds that exist at law or in equity that relate to the validity, enforceability, or revocation of any contract, Quiles v. Financial Exchange, 2005 PA Super 250, 879 A.2d 281, 287 (Pa. Super. 2005), quoting Keystone Tech. Group, Inc. v. Kerr Group. Inc., 2003 PA Super 199, 824 A.2d 1223 (Pa. Super 2003) and Emmaus Municipal Auth. v. Eltz, 416 Pa. 123, 204 A.2d 926 (1964). When a party to an agreement is attempting to prevent another from proceeding to arbitration, the court must apply a two part test. The court must first determine whether a valid agreement to arbitrate exists between the parties, and if so, determine whether the dispute involved is within the scope of the arbitration provision. Highmark, Inc. v. Hospital Service Association of Northeastern Pennsylvania, 2001 PA Super 278, 785 A.2d 93, 98 (Pa. Super. 2001). The [*15] first step the Court must take is to determine [**388] whether a valid arbitration clause exists. There can be little doubt that a valid agreement exists between Barletto and Ferrotech. The parties to the APA are listed on the first page of the agreement as Charles Barletto, Barletto Corporation, Barletto Equipment and Construction Co., Industrial Concerns, and Ferrotech Corporation. On the signature page of the agreement, the same page on which the arbitration clause is found, both Ferrotech and Charles Barletto, as an individual, are signatories. The validity issue the Court must resolve is whether the non-signatory defendants, Heuschkel, Ferromet, and Ferrotech Realty, may enforce the arbitration clause for the claims brought against them by Barletto. When confronted with the question before the Court today, Pennsylvania courts and federal district courts have relied upon traditional principles of contract and agency law. See Dodds v. Pulte Home Corporation, 2006 PA Super 268, 909 A.2d 348 (Pa. Super. 2006) (allowing parent corporation to invoke arbitration clause signed by subsidiary based on obvious and close nexus between contract and non-signatory); Smay v. E.R. Stuebner, Inc., 2004 PA Super 493, 864 A.2d 1266 (Pa. Super. 2004) [*16] (third-party beneficiary bound by arbitration clause); Pritzker v. Merrill Lynch. Pierce, Fenner, & Smith, Inc., 7 F.3d 1110 (3rd Cir. 1993) (agent of signatory bound by arbitration clause). In Thomson-CSF v. American Arbitration Association, 64 F.3d 773 (2nd Cir. 1995), the Second Circuit discussed HN5[ ] five traditional theories arising out of common law principles of contract and agency that can bind non- signatories to arbitration agreements. The theories identified by the court were: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil- piercing/ [**389] alter ego; and 5) equitable estoppel, Thomson-CSF at 776. This Court holds that Barletto is bound to arbitrate by the contract theories associated with agency, the parent-subsidiary relationship, and equitable estoppel. Particularly important to the question sub judice is the principle that HN6[ ] non-signatories can enforce an arbitration agreement where there is an obvious and close nexus between the non-signatories and the contract or contracting parties. Weiner v. Pritzker, Nos. 2846, 101251, 2001 Phila. Ct. Com. Pl. LEXIS 78, 2001 WL 1807929 citing Dayoff Inc. v. H.J. Heinz Inc., 86 F.3d 1287 (3rd Cir. 1996). One instance in which such an obvious and close nexus exists [*17] is the relationship between a principal and an agent. Weiner, 2001 Phila. Ct. Com. Pl. LEXIS 78, [WL] at 2. Under traditional agency theory, an agent is subject to contractual provisions entered into by the principal. Therefore, because a principal is bound under the terms of a valid arbitration clause, its agents, employees, and 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *13; 21 Pa. D. & C.5th 376, **386 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 7 of 12 Page 8 of 12 Aurra Fellows representatives are also covered under the terms of such agreements. Pritzker v. Merrill Lynch, Pierce, Fenner, & Smith, Inc., 7 F.3d 1110, 1121 (3rd Cir. 1993). HN7[ ] In the Commonwealth, agency is defined as the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act. Restatement (Second) of Agency § 1. The relationship necessary to create an agency does not depend on the intent of the parties to create it, nor their belief that they have done so. What is necessary to create the relation is an agreement between the parties, which need not be contractual, that results in the factual [**390] relation to which the legal consequences of an agency are attached. This is the case even if the parties did not call the relationship an agency or did not intend for an agency to exist. Restatement (Second) of Agency § 1 comment b. With [*18] these principles of agency in mind, there can be no doubt that Defendant Heuschkel was acting as an agent of Ferromet, Ferrotech, and Ferrotech Realty when he allegedly breached the APA. As president and sole-owner of the three corporate defendants, Heuschkel was the means through which the corporate entities acted. In Weiner v. Pritzker, the Plaintiff attempted to avoid the arbitration agreement by suing two employees of the principal with which he had signed the agreement. Weiner, 2001 Phila. Ct. Com. Pl. LEXIS 78, 2001 WL 1807929 at 2. Like Heuschkel, Pritzker was the president and active controlling shareholder for the principal company, Omicron. 2001 Phila. Ct. Com. Pl. LEXIS 78, [WL] at 2. The court recognized that this relationship created the factual relation necessary for an agency to be found at law, and likewise an agency relationship exists in the case sub judice. Id. Heuschkel, as the president and controlling shareholder of Ferrotech, is the agent of Ferrotech, the signatory to the APA, and as such he may enforce the arbitration clause found within the APA for claims against him that arise out of or relate to the Agreement. Having established that the arbitration clause is valid as to Heuschkel for the actions he took as the agent of Ferrotech, [*19] the Court now must determine if the clause is valid as to Ferrotech Realty, the sister corporation of Ferrotech. In Pritzker v. Merrill Lynch, Pierce, Fenner, & Smith, 7 F.3d 1110 (3rd Cir. 1993), the Third circuit [**391] found that the non-signatory corporate sister of Merril Lynch, Pierce, Fenner, & Smith ("MLPFS") could enforce an arbitration clause to which MLPFS was the signatory. The holding in Pritzker was based on the principle that HN8[ ] arbitration agreements may be upheld against non-signatories where their interests are directly related to, if not congruent with a signatory. Pritzker at 1122. In reaching its holding, the court focused on the fact that Merril Lynch Asset Management, Inc. ("MLAM"), as a sister corporation to MLPFS, held interests that were directly related to those of MLPFS. Id. at 1122. The issue in Pritzker centered on investment purchases the plaintiffs believed were in violation of the fiduciary duties owed them through the cash management agreements they had with MLPFS. Id. at 1113. The cash management agreements contained clauses that designated arbitration as the forum to resolve any controversies arising between MLPFS and the plaintiffs. Id. The plaintiffs filed [*20] three claims, one of which was against MLAM for participation in the knowing breach of fiduciary duties owed to the plaintiffs through the agreements. Id. In holding that MLAM could compel arbitration, the court relied on the plaintiffs' own theory of liability to find that the interests of MLAM were directly related to, and potentially predicated upon the actions of MPFS, who was a signatory to the agreement. Id. at 1122. The court found this to be determinative in holding that MLAM had interests congruent with its sister corporation. Id. The court ruled that HN9[ ] where parties unmistakably intend to arbitrate all controversies which might arise between them, their [**392] agreement should be applied to claims against agents or entities related to the signatories. Id. The same principles relied upon by the Third Circuit are equally applicable to Ferrotech Realty. Barletto alleges that in early 2008 the parties needed to refinance the mortgage on the property leased to Ferrotech by industrial Concerns through the APA. Barletto claims that Heuschkel, acting as agent of Ferrotech, informed him that to receive the financing the property needed to be deeded to Ferrotech. Instead of the property being [*21] deeded to Ferrotech, the complaint alleges that the property was fraudulently deeded to Ferrotech Realty for the purpose of depriving Barletto of his property rights. The claims that arise out of this transaction are directly related to the actions Heuschkel allegedly took as the agent of the signatory. Just as the plaintiffs in Pritzker were basing liability against MLAM for actions taken on behalf of their sister corporation, Barletto is claiming knowing participation by Ferrotech Realty in the fraudulent refinancing done on behalf of 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *17; 21 Pa. D. & C.5th 376, **389 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 8 of 12 Page 9 of 12 Aurra Fellows Ferrotech. The claims for fraud and rescission against Ferrotech Realty are directly related to transactions arising out of the APA and thus are subject to the arbitration clause. This is an instance, much like in Pritzker, where the parties have unmistakably agreed to arbitrate any and all controversies which might arise between them, and as such the agents and related corporate entities of the parties have the right to enforce the arbitration clause for any such controversies. Another similar situation in which a sister corporation was bound by an arbitration clause is found in the case of [**393] Ketchum v. Almahurst Bloodstock IV, 685 F. Supp. 786 (D. Kan. 1988). [*22] The District Court in Ketchum, had to decide whether an affiliate corporation was bound by an arbitration clause entered into by a corporate sister. Without basing its decision on the affiliate status of the corporation, the court held that the sister corporation was bound by the arbitration clause. The court rested its decision on four specific circumstances present in the case. First, the affiliate corporation agreed to be bound by the arbitration clause as evidenced by its motion to compel arbitration. Id. at 793. Second, the claims against the affiliate corporation were identical to the claims against the signatory corporation. Id. Third, the plaintiff's claims against both defendants arose out of the same transactions. Id. at 794. Finally, the claims against both defendants fell within the broad language of the arbitration clauses. The District Court concluded that based on the four described circumstances it was reasonable for the non- signatory corporate affiliate to be bound by the arbitration clause. Id. at 794. The four circumstances the District Court relied upon to find it reasonable for a non-signatory corporate affiliate to compel arbitration are also present in the case [*23] sub judice. First, Ferrotech Realty has agreed to be bound by the arbitration clause based on its motion to compel arbitration. Second, the claims Barletto has against Ferrotech Realty are identical to the claims against Heuschkel, who was acting on behalf of and as the agent of Ferrotech when the alleged fraud was committed. Third, the two claims filed against both Ferrotech Realty and Heuschkel arise [**394] out of the same transaction. And finally, the claims against Ferrotech Realty are within the ambit of the broadly construed arbitration clause. As was the case in Ketchum, based on the above stated circumstances, it is reasonable for Ferrotech Realty to compel Barletto to arbitrate the two claims filed against the entity. The Court's attention must next turn to the question of whether Ferromet, as the parent company of Ferrotech, may enforce the arbitration clause in the claims filed against it. In the case of Dodds v. Pulte Home Corporation, 2006 PA Super 268, 909 A.2d 348 (Pa. Super. 2006), the Pennsylvania Superior Court held that HN10[ ] a non-signatory parent company could enforce an arbitration clause to which its subsidiary was a signatory. Dodds at 352. In Dodds, the plaintiffs sought to avoid the arbitration [*24] agreement they entered into with the Pulte Home Corporation of the Delaware Valley (PHCDV) by including the parent of PHCDV, Pulte Home Corporation (PHC), who was a non-signatory to the agreement, in their claim. Id. at 348. The plaintiffs in Dodds argued that because a fraud claim was asserted against the non-signatory PHC, the alleged parent of PHCDV, the claim was no longer in the ambit of the arbitration agreement. Id. at 351. The defendants argued that non-signatories to an arbitration agreement are able to enforce the agreement when an obvious and close nexus between the non-signatories and the contract or contracting parties is found. The Superior Court agreed with the defendants. Id. The Superior Court started its analysis of the issue by citing instances in which the Court had found that non- signatories [**395] to a contract have fallen within the scope of the arbitration clause found in the contract. In the cases of. Smay v. E.R. Stuebner, Inc., 2004 PA Super 493, 864 A.2d 1266 (Pa. Super. 2004) and Highmark Inc., v. Hospital Service Ass'n, 2001 PA Super 278, 785 A.2d 93 (Pa. Super. 2001), the superior Court found that HN11[ ] non-signatory third party beneficiaries could fall within the scope of an arbitration clause if that [*25] was the signing parties intent. Dodds at 351. The Court examined the interests of the parties in Smay and found that the claims from the signatory and the claims from the non-signatory were indistinguishable, arose from the same incident and implicated identical legal principles. Because of the close and obvious nexus between the claims, the non- signatory's claim was subject to the arbitration agreement. Dodds at 352. The Superior court extended the rationale in Smay to find that claims against PHC fell within the ambit of the arbitration clause signed by the Dodds and PHCDV. Dodds at 352. The Superior Court found that the interests of PHC and PHCDV were identical and that the arbitration agreement was enforceable by the non- signatory parent. Specifically the Court held that: 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *21; 21 Pa. D. & C.5th 376, **392 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 9 of 12 Page 10 of 12 Aurra Fellows An arbitration agreement would be of little value if a party could obviate the effect of the agreement merely by finding a way to join another party. In no event could the arbitration clause of PHCDV be defeated by adding PHC to the complaint, and because PHC wishes to enforce the arbitration agreement rather than avoid it, Plaintiffs, as signatories to the arbitration agreement, should not be able to avoid the [*26] requirement to arbitrate [**396] by a non-signatory when the non- signatory wants to arbitrate. Dodds at 352. The holding in Dodds thus blocks signatories to an arbitration agreement from attempting to avoid their bargained for contractual obligation by joining a non- signatory parent who shares interests that are obviously and closely related to the interests of a signatory subsidiary. This is especially the case when the non- signatory parent company wishes to enforce the arbitration agreement the signatory party is attempting to avoid. Dodds at 352. When the rationale of the Superior Court in Dodds is applied to the case sub judice, the attempts by Plaintiff Barletto to block enforcement of the arbitration clause must fail. Examining the interests of signatory Defendant Ferrotech with the interests of the non- signatory Defendants Ferromet, Heuschkel, and Ferrotech Realty it is clear that an obvious and close nexus exists among the interests of all defendants. Ferrotech is a subsidiary of Ferromet, Ferrotech Realty is a sister-corporation to Ferrotech, and Heuschkel, who as president and owner of all three corporations, was the agent through which the corporate entities functioned. The claims [*27] filed by Plaintiff Barletto all arise as a result of actions Heuschkel took on behalf of the corporate entities, and therefore the interests of the Defendants are indistinguishable. As the Superior Court stated in Dodds, an arbitration agreement has little value if it can be avoided simply by adding another party to an action. Dodds at 352. This is especially true in the instant action where Plaintiff has attempted to avoid the bargained for arbitration agreement by filing claims arising directly out of the APA against non-signatory parties closely related [**397] to the signatory, whose interests are indistinguishable from the signatory and those who wish to arbitrate. Even if the court were to assume arguendo that the above mentioned theories do not compel Barletto to resolve his claims in arbitration, the theory of equitable estoppel compels that Barletto does so. HN12[ ] The theory has been adopted by several courts of appeal as an appropriate method by which non-signatories to arbitration agreements may compel signatories to arbitrate their claims. See Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757-58 (11th Cir. 1993), cert. denied, 513 U.S. 869, 115 S. Ct. 190, 130 L. Ed. 2d 123 (1994); [*28] J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 320-321 (4th Cir. 1988); McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342, 344 (11th Cir. 1984); Thomson-CSF, S.A. v. American Arbitration Association, 64 F.3d 773 779-780 (2nd Cir. 1995); Hughes Masonry Co. v. Greater Clark County School Bldg. Corp., 659 F.2d 836, 838-839 (7th Cir. 1981). In these cases, the courts identified three factors that compelled a signatory to an arbitration agreement to arbitrate with a non-signatory at the non-signatory's insistence. Signatories were bound to arbitrate because of (1) the close relationship between the entities involved in the disputes; (2) the relationship of the alleged wrongs to the non-signatory's obligations and duties found in the contract; and (3) because the claims involved in the disputes were intimately founded in and intertwined with underlying contractual obligations. Thomson-CSF, 64 F.3d at 779 (quoting Sunkist, 10 F.3d at 757). Of the three factors, the third factor, whether the claims [**398] are intimately founded in and intertwined with underlying contractual obligations is the most important. Sunkist, 10 F.3d at 757-758. At issue in Sunkist [*29] was a license agreement that contained an arbitration clause. The non-signatory to the agreement, Del Monte, was attempting to compel Sunkist to arbitrate the claims between them. Sunkist claimed that it could not be equitably estopped from avoiding arbitration because no references to duties or obligations of Del Monte were present in the license agreement. Id. at 757. The Eleventh Circuit Court of Appeals disagreed. Id. at 758. The court began its analysis by discussing case law across the circuits where the theory of equitable estoppel was used to compel a signatory to arbitrate with a non-signatory. Id. at 757. In those cases, the courts relied on the close relationship between the entities involved in the dispute and on the relationship of the alleged wrongs to the non-signatory's obligations and duties in the contract to determine that the claims were "intimately founded in and intertwined with the underlying contractual obligations." Sunkist, 10 F.3d at 757 (quoting McBro Planning, 741 F.2d at 344.) Sunkist hinged its arguments against the imposition of equitable estoppel on the absence of any mention of Del Monte in 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *25; 21 Pa. D. & C.5th 376, **395 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 10 of 12 Page 11 of 12 Aurra Fellows the licensing agreement. The Eleventh Circuit held that this [*30] reliance was legally insufficient. Id. at 757. In distilling the rationale behind the decisions that used equitable estoppel to bind a signatory, the Eleventh Circuit discovered that the crucial and dispositve factor in those holdings was not the inclusion of the non- signatories in the contracts at issue. Rather, the crucial factor in each case was "the foundation that ultimately, each party must rely [**399] on the terms of the written agreement in asserting their claims." Sunkist at 757. The references in the contracts to non-signatories added support to the conclusion that the claims were "intimately founded in and intertwined with the underlying contract obligation," but the references alone were not a deciding factor. Id. The deciding factor for the court in Sunkist was the degree to which the claims arose out of the obligations and duties contained in the contract at the heart of the dispute. Id. To add support to its position, the Eleventh Circuit discussed the case of J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315 (4th Cir. 1988). The holding in J.J. Ryan allowed a parent company to arbitrate claims based on a contract entered into by its subsidiary. The court did [*31] so based on the fact that the claims against both the parent and subsidiary arose from the same facts and were inherently inseparable. The Fourth Circuit cited the Eleventh Circuit's use of equitable estoppel in McBro as a justification for its holding. The Eleventh Circuit then used the holding of the Fourth Circuit in J.J. Ryan to more fully develop the theory of equitable estoppel as it relates to the binding of signatories to an arbitration agreement at the insistence of non-signatories. Using the holding in J.J. Ryan, the Eleventh Circuit in Sunkist determined that HN13[ ] for equitable estoppel to be applicable, an examination of the nature of the claims being asserted must be conducted to determine if the claims fall within the scope of the agreement and therefore compel the signatory to arbitrate. Sunkist at 758. The Sunkist court stated: [**400] Therefore, the focus of our inquiry should be on the nature of the underlying claims asserted by Sunkist against Del Monte to determine whether those claims fall within the scope of the arbitration clause contained in the license agreement. Id. The Court examined the claims filed by Sunkist and found that all of them made reference to the license agreement [*32] to which Del Monte was not a signatory. Id. The claims did not rely exclusively on the license agreement, but the court found that each claim at least presumed the existence of such an agreement. Each claim arose out of and was directly related to the agreement, and therefore a sufficient nexus between the claims and the agreement existed such that Sunkist could be equitably estopped from avoiding arbitration of its claims. Id. at 758. To determine if Barletto can be equitably estopped from avoiding arbitration of his claims, those claims must be examined to determine if a sufficient nexus exists between the claims and the APA. As has already been established, each claim does arise out of and relate to the terms of the APA. Count One is for breach of the APA. Count Two is for breach of fiduciary duties that arose out of the APA. In Count Three, Barletto is suing for oppression of a minority shareholder. Barletto's alleged position as a minority shareholder arises directly out of the duties and obligations found in the APA. Count Four of the complaint alleges fraud regarding the percentage of profits Barletto was entitled to receive under the APA and where said profits were actually [*33] distributed. Count Five is tied to Count Four, and asks for an accounting of the profits [**401] that have been earned as a result of Barletto entering into the APA. Counts Six and Seven are tied to the refinancing of the property leased to Ferrotech via the APA, and the alleged fraud associated with the refinancing. The two final counts of Barletto's complaint are for defamation/trade libel and for intentional interference with contractual relationships. HN14[ ] It is well established in Pennsylvania that when parties to a contract have included a broad arbitration clause in an agreement, disputes arising out of the contractual relationship must, when requested, be arbitrated. Foster v. Philadelphia Manufacturers, 140 Pa. Commw. 186, 592 A.2d 131, 133 (Pa. Commw. Ct. 1991). Doubts as to whether an arbitration clause covers a particular dispute should be resolved in favor of arbitration. McNulty v. H&R Block. Inc., 2004 PA Super 45, 843 A.2d 1267, 1271 (Pa. Super. Ct. 2004). In J.J. Ryan, three of the counts at issue were for libel, defamation, and injurious falsehood. The counts centered around the malicious sending of untrue notices by the defendant to business associates of the plaintiff informing them that the plaintiff had defaulted [*34] on security agreements. The court concluded that the dispute over the security agreements arose in connection with the contract and therefore all the claims regarding the security agreement disputes could be referred to arbitration. J.J. Ryan, 863 F.2d at 320. 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *29; 21 Pa. D. & C.5th 376, **398 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 11 of 12 Page 12 of 12 Aurra Fellows As was the case in J.J. Ryan, the alleged defamation/trade libel and intentional interference with contractual relationship claims brought by Barletto can be resolved in arbitration. The arbitration clause contained in the APA is broadly worded and covers "any and all disputes, controversies or claims arising out of or relating to this Agreement or for the breach or validity of any term or [**402] provision of this Agreement." As has been previously discussed, these claims originate out of the allegedly wrongful breaches of the APA by Defendant Heuschkel. Plaintiff, in his complaint, admits that because of the alleged breaches of the APA he was forced to start a new business and since then Defendant Heuschkel has "engaged in a campaign of defamation and trade libel" the purpose of which is to drive Barletto out of business. The defamatory statements allegedly made by Heuschkel arose out of the disintegration of the relationship formed [*35] between the two parties through the APA and thus stem from the dispute between the parties regarding the duties and obligations contained within the Agreement. Therefore these counts also arise out of or relate back to the Agreement. Barletto is estopped from avoiding arbitration of these claims. Having established that a valid arbitration agreement exists between all of the parties, the Court's final task is to determine whether all of the alleged claims against the defendants are within the ambit of the arbitration clause. Based on the foregoing analysis of the theory of equitable estoppel, and the previous discussion of Plaintiff's claims, the Court finds that each of the nine counts in the complaint arise directly out of or relate back to the duties and obligations contained within the APA or for the breach of said duties and obligations and therefore may be compelled to arbitration. In conclusion, Plaintiff Charles Barletto must arbitrate his claims against Defendants Heuschkel, Ferrotech, Ferromet, and Ferrotech Realty. HN15[ ] Traditional contract theories of agency and estoppel compel Barletto, a signatory to the agreement, to arbitrate at the insistence [**403] of non-signatory defendants who [*36] are the agents or affiliates of the signatory to the agreement when the claims and positions of all parties are intimately founded on and intertwined with the underlying contractual obligations found in the APA. "In short, plaintiff cannot have it both ways. It cannot rely on the contract when it works to its advantage, and repudiate it when it works to its disadvantage." Hughes Masonry, 659 F.2d at 839. Barletto bargained for the provisions found in the APA, and relies on those same provisions in his claims against the defendants. He cannot now avoid his contractual obligations by repudiating the portions of the contract that are not in his favor. Defendant's preliminary objections are sustained and Plaintiff's claim is dismissed so that it may be filed within the proper venue. End of Document 2011 Pa. Dist. & Cnty. Dec. LEXIS 318, *34; 21 Pa. D. & C.5th 376, **401 Case 4:16-cv-01347-MWB Document 74-2 Filed 06/27/17 Page 12 of 12 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Distinguished by Montalbano v. Cavalry Portfolio Services, LLC, W.D.Pa., February 15, 2013 2006 WL 3040905 Only the Westlaw citation is currently available. United States District Court, W.D. Pennsylvania. Thomas J. BONTEMPO and Terry Monteleone, and all others similarly situated, Plaintiffs, v. WOLPOFF & ABRAMSON, L.L.P., Defendant. No. Civ.A. 06-745. | Oct. 24, 2006. Attorneys and Law Firms Jeffrey L. Suher, Monroeville, PA, for Plaintiffs. Ronald S. Canter, Wolpoff & Abramson, Rockville, MD, Robert N. Polas, Wolpoff & Abramson, Pittsburgh, PA, for Defendant. ORDER AMBROSE, J. *1 AND NOW, this 23 rd day of Oct., 2006, after the plaintiffs filed a purported class action complaint in the above- captioned case, and after the defendant moved to dismiss the claim of plaintiff Terry Monteleone and to compel arbitration of Monteleone's claim, and after a Report and Recommendation was issued by the United States Magistrate Judge, and the parties were granted thirteen days after being served with a copy to file written objections thereto, and upon consideration of the objections filed by the defendant, as well as the plaintiffs' response to those objections, and after independent review of the pleadings, and the Magistrate Judge's Report and Recommendation, which is adopted as the opinion of this Court, IT IS ORDERED that the defendant's motion to dismiss the claim of plaintiff Terry Monteleone and to compel arbitration of the claim (Docket No. 4) is denied. REPORT AND RECOMMENDATION MITCHELL, Magistrate J. I. Recommendation: It is respectfully recommended that the defendant's motion to dismiss the claim of plaintiff Terry Monteleone and to compel arbitration of the claim (Docket No. 4) be denied. II. Report: Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 1 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Presently before the Court is a motion to dismiss the claim of plaintiff Terry Monteleone and to compel arbitration of the claim filed by defendant Wolpoff & Abramson, L.L.P. (“W & A”). For reasons discussed below, W & A's motion to dismiss should be denied. The plaintiffs, Thomas Bontempo and Terry Monteleone, have filed a purported class action complaint, alleging that W & A obtained arbitration awards through a non-participatory process using false, deceptive or misleading means in connection with the collection of their debts in violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). The plaintiffs are said to be consumers within the meaning of the FDCPA, while W & A is alleged to be a debt collector within the meaning of the Act. 1 1 The FDCPA defines the term “consumer” as “any natural person obligated or allegedly obligated to pay any debt.” 15 U.S.C. § 1692a(3). The term “debt collector” means in relevant part, “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect ... debts owed or ... asserted to be ... due another.” Id. at § 1692a(6). It is alleged in the complaint that plaintiffs Bontempo and Monteleone obtained consumer credit from MBNA America Bank, N.A. (“MBNA”) by means of a credit card; that both plaintiffs incurred debt for personal, family or household purposes and fell behind in their credit card payments; and that as a result, W & A began dunning them on the debt. The plaintiffs contend that W & A obtained arbitration awards against them to recover the amounts of their purported debts, but the arbitration awards are invalid, as the process concluded without any participatory hearing, and Bontempo and Monteleone were not allowed to personally attend the process to oppose the claims presented by W & A, and the amounts of their debts were improperly increased in the arbitral awards. The plaintiffs complain it is W & A's practice to obtain alleged arbitration awards through an invalid, non-participatory process, and to add costs and fees to any arbitral award, after which it uses those awards to attempt to collect debts. *2 The plaintiffs commenced this action on behalf of themselves and a purported class of individuals “with addresses in Pennsylvania” and from whom W & A “obtained or attempted to obtain ... an ‘arbitration award’ through an arbitral process with non-participatory process absent an agreement to the contrary” (complaint at ¶ 25(i-ii)). The plaintiffs seek actual and statutory damages pursuant to 15 U.S.C. § 1692k, and they invoke the Court's federal question jurisdiction. In response to the complaint, W & A filed an answer to the claim of plaintiff Thomas Bontempo. However, it moved to dismiss the claim of plaintiff Terry Montelone and to compel arbitration of the claim pursuant to F.R.Civ.P. 12(b)(1). A Rule 12(b)(1) motion to dismiss “may be treated as either a facial or factual challenge to the court's subject matter jurisdiction.” Gould Electronics Inc. v. U.S., 220 F.3d 169, 176 (3d Cir.2000). In reviewing a “facial attack”, which is based on the legal sufficiency of the claim, the Court “must only consider the allegations of the complaint and documents referenced therein and attached thereto in the light most favorable to the plaintiff.” Id. Conversely, in reviewing a “factual attack”, as here, where a challenge is based on the sufficiency of jurisdictional fact, “the Court is free to weigh the evidence and satisfy itself whether it has power to hear the case.” See, Carpet Group Intern. v. Oriental Rug Importers, 227 F.3d 62, 69 (3d Cir.2000). In such a scenario, “the court may consider evidence outside the pleadings”, Gould Electronics, 220 F.3d at 176, as “no presumptive truthfulness attaches to plaintiff's allegations”. Carpet Group, 227 F.3d at 69. In support of its motion to dismiss, W & A avers that MBNA retained it as the law firm to pursue recovery of the outstanding balance due on plaintiff Monteleone's credit card account through binding arbitration. As gleaned from the record, W & A, on behalf of MBNA, filed a claim against Terry Monteleone in the National Arbitration Forum (“NAF”), alleging as follows: that Monteleone opened a credit card account with MBNA, which is governed by a Credit Card Agreement (hereinafter, the “Agreement”); that Monteleone is in default under terms of the Agreement and is indebted to MBNA in the amount of $44,683.03; and that despite repeated demands for payment, Monteleone has not Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 2 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 paid the amount due, such that MBNA seeks an award of the amount it is owed, plus all arbitration fees incurred, process of service fees and attorney fees (hereinafter, the “arbitration claim”). 2 2 See, Exhibit 1 to W & A's brief in support of its present motion. The parties' Agreement, which was appended to the arbitration claim, contains a binding arbitration clause which provides in pertinent part: ... Any claim or dispute (“Claim”) by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or any prior Agreement of your account (whether under a statute, in contract, tort, or otherwise and whether for money damages, penalties or declaratory or equitable relief), including Claims regarding the applicability of this Arbitration Section or the validity of the entire Agreement or any prior Agreement, shall be resolved by binding arbitration. The arbitration shall be conducted by the National Arbitration Forum (“NAF”), under the Code of Procedure in effect at the time the claim is filed ... 3 3 Id. at “Arbitration and Litigation” section of the Agreement. *3 The arbitration clause further provides: “This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16 ... [T]his Arbitration and Litigation section applies to all Claims now in existence or that may arise in the future”. 4 4 Id. The Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”), provides in relevant part that “[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. “The FAA makes agreements to arbitrate enforceable to the same extent as other contracts.” Harris v. Green Tree Financial Corp., 183 F.3d 173, 178 (3d Cir.1999). Thus, “federal law presumptively favors the enforcement of arbitration agreements”. Id. Indeed, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration ...” Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). An arbitration provision should be interpreted to cover the dispute unless it can be stated with “positive assurance” that the dispute was not meant to be arbitrated. Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 44 (3d Cir.1978). Believing that the arbitration clause in Terry Monteleone's Agreement mandates that the parties submit their claims to arbitration, W & A filed the aforesaid arbitration claim and served it on plaintiff Monteleone. An arbitrator appointed to decide the claim reviewed all evidence in the matter and entered an award in favor of MBNA in the amount of $54,305.52. 5 5 See, Exhibit 2 to W & A's brief in support of its present motion. To obtain judgment on the arbitration award, W & A, on behalf of MBNA, filed suit in the Court of Common Pleas of Indiana County, PA. 6 After hearing argument on MBNA's petition to confirm the arbitration award, the Court of Common Pleas issued an Order on June 21, 2005, granting the petition. 7 Terry Monteleone appealed the Order confirming the arbitration award to the Pennsylvania Superior Court. On July 20, 2006, the Superior Court affirmed the Court of Common Pleas' ruling which confirmed the arbitration award. 8 Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 3 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 6 See, Exhibit 3 to W & A's brief in support of its present motion. 7 See, Exhibit 4 to W & A's brief in support of its present motion. 8 See, Exhibit A to W & A's supplemental brief in support of its present motion. In moving to dismiss the claim of Terry Monteleone, W & A argues that since the Agreement between Monteleone and MBNA requires that all claims related to their Agreement be resolved through binding arbitration, the Court should dismiss Terry Monteleone's claim and compel arbitration of it. W & A, which is not a signatory to the Agreement, makes several arguments in support of its position, all of which are disputed by Monteleone. “When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally apply state law principles that govern the formation of contracts.” First Options of Chicago v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Here, the Agreement contains a choice of law provision, specifying it is to be “governed by the laws of the State of Delaware”. 9 Plaintiff Monteleone agrees that Delaware law governs this dispute. 9 See, “What Law Applies” Section of the Agreement. *4 W & A asserts that Monteleone is collateral estopped from challenging the validity of the arbitration agreement, for on July 20, 2006, the Pennsylvania Superior Court affirmed the decision of the Court of Common Pleas which confirmed the arbitration award entered against Monteleone. It is clear, however, that collateral estoppel is inapplicable here. Collateral estoppel bars a party from re-litigating an issue previously litigated and resolved by a fact-finder. Higgins v. Walls, 901 A.2d 122, 137 (Del.Super.2005). In order for collateral estoppel to apply, the following criteria must be met: (1) the issue previously decided must be identical to the issue at bar; (2) the prior issue was finally adjudicated on the merits; (3) the party against whom the doctrine is invoked was a party or in privity with a party to the prior adjudication; and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Id. We find that the first and fourth criteria listed above are not satisfied. That is, the issue previously decided in the state court matter is not identical to the issue before us. In the state court action, MBNA filed a petition to confirm the arbitration award entered against Monteleone in the NAF, and the Court of Common Pleas confirmed the arbitration award for the sole reason that Monteleone “failed to make an application to vacate or modify the arbitration award within thirty (30) days prescribed by 42 Pa.C.S.A. § 7314”. 10 On July 20, 2006, the Pennsylvania Superior Court affirmed that ruling, finding that Monteleone “waived his present challenges to the arbitration award by failing to file a petition to modify or vacate that award within the time provided by law.” 11 Clearly, the issue presented here-whether Monteleone is bound to arbitrate his FDPCA claim against W & A by virtue of his Agreement with MBNA-was neither decided in the state court matter, nor litigated there. As a result, collateral estoppel is not applicable here. 10 See, Exhibit 4 to W & A's brief in support of its present motion. 11 See, Exhibit A to W & A's supplemental brief in support of its present motion. W & A also argues that it may compel arbitration of Monteleone's claim against it, because it was MBNA's “agent” as set forth in the arbitration clause. As noted above, the arbitration clause in the Agreement provides that: “[a]ny claim or dispute (“Claim”) by either you or us against the other ... shall be resolved by binding arbitration.” The word “you” in the above clause pertains to credit card users such as Terry Monteleone. The word “us”, however, is defined in the arbitration clause in the following ways: ... ‘us' means MBNA America Bank, N.A., its parent, subsidiaries, affiliates, licensees, predecessors, successors, assigns, any purchaser of your account, and all of their officers, directors, employees, agents, and assigns or any and all of them. (Emphasis added). Additionally, ... ‘us' shall mean any Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 4 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 third party providing benefits, services, or products in connection with the account (including but not limited to credit bureaus, merchants that accept any credit device issued under the account, rewards or enrollment services, credit insurance companies, debt collectors, and all of their officers, directors, employees and agents) if and only if, such a third party is named by you as a codefendant in any Claim you assert against us. (Emphasis added). 12 12 See, Arbitration and Litigation Section of the Agreement. *5 W & A insists it may compel arbitration of Monteleone's claim against it, as it acted as MBNA's “agent” in pursuing the underlying arbitration claim (and thereby fits within the first definition of “us”). Conversely, Monteleone argues that W & A may not compel arbitration of his claim under the Agreement, as it is a “debt collector”, and the complaint names it as the lone defendant, not as a co-defendant with MBNA (such that it falls within the additional definition of “us”). Under Delaware law, the construction of contract language is a question of law. Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del.1992). In interpreting a contract, the primary goal is to “attempt to fulfill, to the extent possible, the reasonable shared expectations of the parties at the time they contracted.” Comrie v. Enterasys Networks, Inc., 837 A.2d 1, 13 (Del.Ch.2003). In order to ascertain intent, Delaware courts utilize an “objective” theory of contracts. Haft v. Haft, 671 A.2d 413, 417 (Del.Ch.1995). Under this theory, where parties enter into an unambiguous written contract “a contract's construction should be that which would be understood by an objective reasonable third party.” In re: Stone & Webster, Inc. v. Shaw Group, 2005 WL 1036556, *5-6 (D.Del., May 3, 2005). However, “inconsistent contractual provisions may create ambiguity in a contract.” Id. A contract is ambiguous “when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.” Lorillard Tobacco Co. v. American Legacy Foundation, 903 A.2d 728, 2006 WL 2035682, *8 (Del.Super., July 17, 2006). “Ambiguity does not exist where a court can determine the meaning of a contract without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends.” Id. Certainly, “[a] contract is not rendered ambiguous simply because the parties do not agree upon its proper construction.” Id. As discussed above, the arbitration clause provides in pertinent part that any Claim “by either you or us against the other ... shall be resolved by binding arbitration.” In one part of the arbitration clause, the word “us” is defined to encompass MBNA and its “agents”. Thus, W & A insists that as the law firm retained by MBNA to collect debts for it under the Agreement, it is MBNA's “agent” and a named intended third party beneficiary under the arbitration clause. However, the word “us” is defined in another portion of the arbitration clause as encompassing “any third party providing benefits [or] services ... in connection with the account (including but not limited to ... debt collectors ... ) if, and only if, such a third party is named by you as a codefendant in any Claim you assert against us.” According to Terry Monteleone, W & A was a debt collector for MBNA on his account, and since he named W & A as the sole defendant in his FDCPA suit (not as a codefendant with MBNA), the arbitration clause does not pertain to W & A, and it may not compel arbitration of his claim against it. *6 Recently, a similarly-worded arbitration clause was reviewed and interpreted by the court in Karnette v. Wolpoff & Abramson, L.L.P., 2006 WL 2222673 (E.D.Va., Aug.2, 2006). In that case, as here, credit cards were issued by MBNA to consumers who used the credit cards for personal, household and family purposes. The consumers became indebted, and upon their defaults, MBNA referred the accounts for collection to W & A, a multi-state debt collection law firm. 2006 WL 2222673, *1. In Karnette, as here, the consumers filed a purported class action against W & A, alleging that it engaged in false, deceptive and unfair debt collection practices in violation of the FDCPA. W & A subsequently moved to compel arbitration of the plaintiffs' FDCPA claim, citing the arbitration clause in MBNA's agreements with them. Id. Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 5 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 In Karnette, the arbitration clause at issue was identical to the one here, and the parties made similar arguments in support of their positions as here. Id. at *1-*2. Relying on Delaware law (which governed MBNA's credit card agreement), the Karnette Court interpreted the arbitration clause in favor of the plaintiffs and against W & A, stating: W & A argues that, as a law firm working for MBNA, it is an agent of MBNA, and, therefore, is a named third party beneficiary of the arbitration provision ... As such, W & A claims that it is protected from suit by reading the arbitration clause to state, ‘any claims by ... you ... against the ... agents ... of the other ... shall be resolved by binding arbitration.’ However, it is undisputed that W & A is a ‘debt collector’ as that term is defined in the FDCPA. Where a contract specifies different rights to different specifically mentioned entities, the contract must be interpreted to require that specificity. See, DCV Holdings, Inc. v. ConAgra, 889 A.2d 954, 961 (Del.2005) (“Specific language in a contract controls over general language, and where specific and general provisions conflict, the specific provision ordinarily qualifies the meaning of the general one.”) [citations omitted]. see generally Am.Jur. Contracts § 363. 13 Otherwise, the use of two different terms would be mere surplusage. Colautti v. Franklin, 439 U.S. 379, 99 S.Ct. 675, 58 L.Ed.2d 596 (1979) (one clause should not be read to render another inoperative). 13 In relevant part, Am.Jur. Contracts § 363 provides: “In general, where there are general and specific provisions in a contract relating to the same thing, the special provisions control ... Where the parties express themselves in reference to a particular matter, the attention is directed to that, and it must be assumed that it expresses their intent, whereas a reference to some general matter, within which the particular matter may be included, does not necessarily indicate that the parties had the particular matter in mind. Because the credit card agreement specifically mentions debt collectors in the arbitration provision, that term cannot be construed to be without purpose. While a debt collector may function as an agent for the specific purpose of collecting debts, time-honored principles of contract construction require a thing specifically named to be specifically treated. E.g. Bock v. Perkins, 139 U.S. 628, 634, 11 S.Ct. 677, 35 L.Ed. 314 (1891) (“The particular description [in the contract] must control the ... general description ...”); DCV Holdings, Inc. v. ConAgra, 889 A.2d 954, 961 (Del.2005) (“Specific language in a contract controls over general language ...”) ... Accordingly, W & A is to be treated as a debt collector rather than as a general agent because W & A functioned only to serve MBNA for the purpose of collecting overdue credit card debts. By the terms of the arbitration agreement, there is no agreement to arbitrate the claim against W & A under the FDCPA because the plaintiffs' action does not name MBNA as a co-defendant. *7 2006 WL 2222673, at *4-*5. We believe the Karnette Court's construction of the arbitration clause is proper. As explained in Karnette: By putting the Arbitration and Litigation section in the credit card agreement, MBNA sought to limit its exposure, and the exposure of all in its corporate family, to litigation in court. It also foresaw that plaintiffs might sue third party entities together with MBNA. Therefore, MBNA wrote a clause into the arbitration agreement that required arbitration where MBNA was joined as a co- defendant in a suit against a third party. However, for obvious reasons, MBNA had less reason for concern about suits against third parties where MBNA was not a co-defendant. Thus, given its plain meaning and accorded a common sense construction, the arbitration clause does not operate here because MBNA is not a co-defendant in this action. Id. at *4. We too interpret the arbitration clause against W & A for the reasons set forth in Karnette. Furthermore, we disagree with W & A that Monteleone is equitably estopped from denying that his claim against it is to be resolved by binding arbitration. Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 6 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 “Delaware allows a nonsignatory to a contract to compel a signatory to arbitrate under an equitable estoppel theory.” Wilcox & Fetzer, Ltd. v. Corbett & Wilcox, 2006 WL 2473665, *4 (Del.Ch., Aug.22, 2006). Under this theory, a signatory is compelled to arbitrate with a nonsignatory in either of two circumstances: First, equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory. When each of a signatory's claims against a nonsignatory makes reference to or presumes the existence of the written agreement, the signatory's claims arise out of and relate directly to the written agreement and arbitration is appropriate. Second, application of equitable estoppel is warranted when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract ... Id. at *5 (emphasis added), quoting Grigson v. Creative Artists Agency, 210 F.3d 524, 527 (5 th Cir.2000) (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11 th Cir.1999)). Here, neither of the above-mentioned circumstances for equitable estoppel is applicable. First, Terry Monteleone need not rely on the terms of his Agreement with MBNA to assert his claim against W & A. While Monteleone states in his FDCPA complaint that he obtained consumer credit from MBNA through a credit card, after which he fell behind in his payments (complaint at ¶¶ 15, 17), the crux of his claim is that W & A violated the FDCPA by obtaining an arbitration award through a non-participatory process using false, deceptive or misleading means in connection with the collection of his debt (complaint at ¶¶ 1, 19-21, 32). Monteleone could have asserted his claim against W & A without making any reference to his Agreement with MBNA. Likewise, the second circumstance for equitable estoppel does not apply, as Monteleone's complaint raises no claim against MBNA, which is not named as a co-defendant with W & A. *8 There is another scenario in which courts have bound a signatory to arbitrate with a nonsignatory under a theory of equitable estoppel, namely: because of ‘the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and [the fact that] the claims were intimately founded in and intertwined with the underlying contract obligations.’ E.I. Dupont De Nemours v. Rhone Poulenc Fiber, 269 F.3d 187, 199 (3d Cir.2001), quoting Thomson-CSF, S.A. v. American Arbitration Ass'n., 64 F.3d 773, 779 (2d Cir.1995). Unfortunately for W & A, this theory of equitable estoppel is also inapplicable, as no “close relationship” (such as a corporate parent and subsidiary) exists between W & A and Monteleone; W & A appears to have no obligations or duties under the Agreement between Monteleone and MBNA; and Monteleone's claim against W & A is not intertwined with his Agreement with MBNA. For these reasons, equitable estoppel is not appropriate here. Therefore, it is recommended that the defendant's motion to dismiss the claim of Terry Monteleone and to compel arbitration of the claim be denied. Within thirteen (13) days after being served with a copy, any party may serve and file written objections to this Report and Recommendation. Any party opposing the objections shall have seven (7) days from the date of service of objections to respond thereto. Failure to file timely objections may constitute a waiver of any appellate rights. All Citations Not Reported in F.Supp.2d, 2006 WL 3040905 Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 7 of 8 Bontempo v. Wolpoff & Abramson, L.L.P., Not Reported in F.Supp.2d (2006) 2006 WL 3040905 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-3 Filed 06/27/17 Page 8 of 8 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2015 WL 5144030 United States District Court, E.D. Pennsylvania. Fabio Caparra, Plaintiff, v. Maggiano's Inc. et al., Defendants. CIVIL ACTION NO. 14–05722 | Signed September 1, 2015 Attorneys and Law Firms Stephen G. Console, Caren N. Gurmankin, Console Law Offices LLC, Philadelphia, PA, for Plaintiff. Stephanie Jill Peet, Samantha Sherwood Bononno, Jackson Lewis P.C., Philadelphia, PA, for Defendants. MEMORANDUM PAPPERT, District Judge *1 Plaintiff Fabio Caparra (“Caparra”) sued Maggiano's, Inc. (“Maggiano's), Brinker International, Inc. (“Brinker International”), and Brinker International Payroll Company, L.P. (“Brinker Payroll”) (collectively referred to as “Defendants” throughout the complaint), alleging that Defendants violated the Family Medical Leave Act, 29 U.S.C. § 2601 et seq. (“FMLA”), the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. (“ADA”), and the Pennsylvania Human Relations Act, 43 P.S. § 951 et seq. (“PHRA”) by terminating him while he was on medical leave. Approximately ten months before his termination, Caparra signed an agreement to arbitrate with Brinker Payroll. Brinker Payroll now seeks to enforce this agreement and compel Caparra to arbitrate his claims. Maggiano's and Brinker International join the motion to compel and also move to dismiss. 1 For the reasons that follow, the Court will compel arbitration and stay these proceedings while the parties arbitrate Caparra's claims. 1 Brinker International and Maggiano's contend that they are improperly named defendants because neither employed Caparra. (See, e.g., Defs.' Reply 2–4, ECF No. 19.) They thus argue that they should be dismissed. (See, e.g., Defs.' Mot. Dismiss 8, ECF No. 16.) However, a challenge to the merits of Caparra's claims must be decided by the arbitrator. PaineWebber Inc. v. Hartman, 921 F.2d 507, 511 (3d Cir.1990) (“If ... the court determines that an agreement exists and that the dispute falls within the scope of the agreement, it then must refer the matter to arbitration without considering the merits of the dispute.”), overruled on other grounds by Howsam v. Dean Witter Reynolds, 537 U.S. 79, 85 (2002). I. Background In 2004, Defendants hired Caparra as a sous chef. (Compl. ¶ 23, ECF No. 1.) Over the next six years, Caparra received several promotions. In December 2010, he was promoted to Executive Chef–Managing Partner, making him one of the highest-level managers at his location. (Id.) On April 27, 2012, Caparra signed an agreement to arbitrate with Brinker Payroll. (Caparra Dep. 94:17–95:11, Apr. 14, 2015, Pl.'s Opp'n Mot. Dismiss Ex. 11.) In November 2012, Caparra informed Defendants that he needed to take medical leave to undergo surgery for acute spinal stenosis. (Compl.¶ 28.) Caparra began leave on January 21, 2013–the same day he underwent back surgery. (Id. ¶ 29.) On February 27, 2013, Caparra sent Defendants a doctor's note stating that he was cleared to return to work if Defendants provided certain accommodations. (Id. ¶ 36.) Defendants received the doctor's note, but did not discuss Caparra's requested Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 1 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 accommodations. (Id. ¶ 37.) The next day, while Caparra remained on leave, his supervisor David Kososki terminated him. (Id. ¶ 39.) Caparra later learned that he had been terminated for “misconduct and behavior deemed detrimental,” but was provided no further explanation. (Id. ¶ 41.) Caparra contends that the Defendants interfered with his rights under the FMLA, and retaliated against him for exercising those rights by terminating him while he was out on leave. Caparra avers that this same incident violated the ADA and the PHRA. *2 On December 8, 2014, Defendants filed a motion to dismiss and to compel arbitration. (ECF No. 6.) In response, Plaintiff argued inter alia that the arbitration agreement was unconscionable. (See ECF No. 10.) Concluding that it was unable to rule on Defendants' motion in the absence of a fuller evidentiary record, the Court denied the motion without prejudice and ordered the parties to conduct discovery into Plaintiff's unconscionability arguments. (See Order, ECF No. 15.) Discovery revealed the following pertinent facts. 2 On April 27, 2012, Caparra learned that all “teammates” were being asked to sign a stand-alone arbitration agreement. (Caparra Dep. 94:23–95:5; see also id. at 95:17–95:21.) Caparra was told that he needed to sign the document the day he received it, and he did so after learning that his superiors had also signed the document. (Id.; see also id. at 98:13–99:22.) Caparra asked to call his wife before signing the document, and he was permitted to make the call. (Id. at 105:23–106:1.) Caparra did not, however, ask any questions about the document nor did he read it before signing it. (Id. at 101:4–103:2; 110:9–110:21.) Rather, he signed the document in reliance on his superiors' assurances that they signed the document, his belief that the document was innocuous, and in an effort to encourage his kitchen staff to sign the document. (Id. at 92:3–93:22.) 2 Most of the evidence submitted by the parties in support of their positions pertains to whether the arbitration agreement is procedurally, as opposed to substantively, unconscionable. For reasons discussed infra, the Court does not address the procedural unconscionability issue. The Court accordingly does not recount those facts in detail here. The arbitration agreement 3 (the “Arbitration Agreement”) that Caparra signed on April 27, 2012 states the following: Brinker Payroll International Company, L.P. (“Brinker”) makes available certain internal procedures for amicably resolving any complaints or disputes you have relating to your employment. However, if you are unable to resolve any such complaints or disputes to your satisfaction internally, Brinker has provided for the resolution of all disputes that arise between you and Brinker through formal, mandatory arbitration before a neutral arbitrator. Because of, among other things, the delay and expense which result from the use of the court systems, any legal or equitable claims or disputes arising out of or in connection with employment, terms and conditions of employment, or the termination of employment with Brinker will be resolved by binding arbitration instead of in a court of law or equity. This agreement applies to all disputes involving legally protected rights (e.g., local, state and federal statutory, contractual or common law rights) regardless of whether the statute was enacted or the common law doctrine was recognized at the time this agreement was signed. This agreement does not limit an employee's ability to complete any external administrative remedy (such as with the EEOC). This Agreement to Arbitrate substitutes one legitimate dispute resolution form (arbitration) for another (litigation), thereby waiving any right of either party to have the dispute resolved in court. This substitution involves no surrender, by either party, of any substantive statutory or common law benefits, protection or defense for individual claims. You do waive the right to commence or be party to any representative, collective or class action. *3 Arbitration Rules ...Each party is entitled to representation by an attorney throughout the arbitration proceeding at their own expense. Each party shall bear their own fees and expenses, unless otherwise awarded by the arbitrator in the final, written decision. Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 2 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 ...The arbitrator may award individual relief only ... (Defs.' Mot. Dismiss Ex. G; Pl.'s Opp'n Mot. Dismiss Ex. 1) (emphasis added). The Arbitration Agreement also sets forth where the arbitration proceeding will occur, the process to initiate arbitration, and additional procedural rules. (See id.) 3 At the time of his hire in 2004, Caparra agreed to be bound by a similar arbitration agreement. (See Defs.' Mot. Dismiss Ex. F; Pl.'s Opp'n Mot. Dismiss Ex. 10, ECF No. 18.) As Caparra points out, the 2004 agreement obligated him to arbitrate disputes “arising out of or related to [his] compensation, employment or termination of employment with Brinker International or its related companies.” (Defs.' Mot. Dismiss Ex. E.) The 2012 agreement does not include this “related companies” language. Caparra contends that this distinction means that he cannot be compelled to arbitrate his claims against Defendants Brinker International and Maggiano's. However, as discussed infra, the absence of this language does not permit Caparra to avoid his arbitration obligations. The agreements are otherwise substantially similar and Caparra makes no arguments regarding the unenforceability of the agreement signed in 2004. For these reasons, the Court considers only the agreement signed on April 27, 2012. II. Legal Standard For a Motion to Compel Arbitration The Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”) evinces Congress' liberal policy favoring arbitration agreements. 4 Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983). Pursuant to Section 2 of the FAA, arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. “Agreements to arbitrate employment disputes, whether based on federal or state statutory claims, are enforceable under the [FAA].” Hudyka v. Sunoco, Inc., 474 F.Supp.2d 712, 715 (E.D.Pa.2007) (citing Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001)). “A district court is authorized to compel arbitration if a party to an arbitration agreement institutes an action that involves an arbitrable issue and one party to the agreement has failed to enter arbitration.” Harris v. Green Tree Fin. Corp., 183 F.3d 173, 179 (3d Cir.1999). 4 All parties agree that the FAA governs this dispute. The Third Circuit Court of Appeals recently clarified the standard by which a district court must review a motion to compel arbitration: [W]hen it is apparent, based on the face of the complaint, and documents relied upon in the complaint, that certain of a party's claims are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery's delay. But if the complaint and its supporting documents are unclear regarding the agreement to arbitrate, or if the plaintiff has responded to a motion to compel arbitration with additional facts sufficient to place the agreement to arbitrate in issue, then the parties should be entitled to discovery on the question of arbitrability before a court entertains further briefing on the question. After limited discovery, the court may entertain a renewed motion to compel, this time judging the motion under a summary judgment standard. *4 Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764, 776 (3d Cir.2013) (internal quotation marks and citations omitted). Because the complaint did not make clear that the parties' dispute was subject to arbitration and Caparra asserted in response to Defendants' initial motion that the agreement to arbitrate was unconscionable, the Court ordered limited discovery on the issue. After completing discovery, Defendants filed a renewed motion to dismiss and to compel arbitration pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court must, however, entertain the renewed motion to compel under a summary judgment standard. Under a summary judgment standard, a court will grant the motion “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In ruling on a summary judgment motion, we consider “the facts and draw all reasonable inferences in the light most favorable to the Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 3 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 plaintiff, the party who opposed summary judgment.” Lamont v. New Jersey, 637 F.3d 177, 179 n.1 (3d Cir.2011) (citing Scott v. Harris, 550 U.S. 372 (2007)). “The party seeking to compel arbitration bears the initial burden of showing that the non-movant has failed to establish one or more essential elements of its case. If it meets this burden, the party seeking to avoid arbitration must point to specific facts in the record that demonstrate that there is a genuine issue for trial.” Porreca v. Rose Grp., No. 13–cv–1674, 2013 WL 6498392, at *6 (E.D.Pa. Dec. 11, 2013) (citing Guidotti, 716 F.3d at 773)). III. Discussion “Because arbitration is a matter of contract, before compelling arbitration pursuant to the [FAA], a court must determine that (1) an enforceable agreement to arbitrate exists, and (2) the particular dispute falls within the scope of that agreement.” MacDonald v. Unisys Corp., 951 F.Supp.2d 729, 734 (E.D.Pa.2013) (quoting Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir.2009)). Caparra challenges only the enforceability of the Arbitration Agreement, contending that (1) that the agreement is invalid because it is not supported by consideration, and (2) that the agreement is unenforceable because it is unconscionable. The Court considers the arguments in turn. a. Validity of the Arbitration Agreement “To determine whether the parties have agreed to arbitrate, we apply ordinary state-law principles that govern the formation of contracts.” Century Indem. Co. v. Certain Underwriters at Lloyd's London, 584 F.3d 513, 524 (3d Cir.2009) (citations omitted). The parties agree that Pennsylvania contract principles apply. To determine whether a contract was formed under Pennsylvania law, a court must look to: (1) whether both parties manifested an intention to be bound by the agreement; (2) whether the terms of the agreement are sufficiently definite to be enforced; and (3) whether there was consideration. Id. at 533. “Pennsylvania contract law assigns to the party seeking arbitration ‘the burden of demonstrating that a valid agreement to arbitrate exists between the parties.” Swartz v. Comcast Corp., 256 Fed.Appx. 515, 518 (3d Cir.2007) (quoting Goldstein v. Depository Trust Co., 717 A.2d 1063, 1067 (Pa.Super.Ct.1998)). Caparra contends only that the Arbitration Agreement is not supported by consideration. “Consideration confers a benefit upon the promisor or causes a detriment to the promisee and must be an act, forbearance or return promise bargained for and given in exchange for the original promise.” Channel Home Ctrs. v. Grossman, 795 F.2d 291, 299 (3d Cir.1986) (citation omitted). The Arbitration Agreement states that Brinker Payroll “has provided for the resolution of all disputes that arise between you and Brinker through formal, mandatory arbitration before a neutral arbitrator.” This language makes clear that Caparra and Brinker Payroll mutually agreed to forgo litigation and to arbitrate all disputes covered by the agreement. “When both parties have agreed to be bound by arbitration, adequate consideration exists and the arbitration agreement should be enforced.” Blair v. Scott Specialty Gases, 283 F.3d 595, 603–04 (3d Cir.2002). The Arbitration Agreement is supported by consideration, and is thus a valid contract. b. Unconscionability *5 Caparra also contends that the Arbitration Agreement is unconscionable and thereby unenforceable. (Pl.'s Opp'n Mot. Dismiss 12.) “To prove unconscionability under Pennsylvania law, a party must show that the contract was both substantively and procedurally unconscionable.” Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 230 (3d Cir.2012) (citing Salley v. Option One Mortg. Corp., 925 A.2d 115, 119 (Pa.2007)). “[T]he Pennsylvania Supreme Court has indicated that it might be appropriate to use a ‘sliding scale approach’ so that where the procedural unconscionability is very high, a lesser degree of substantive unconscionability may be required and presumably, vice-versa.” Quilloin, 673 F.3d at 230 (citation omitted). This “sliding scale approach” does not, however, eliminate a party's obligation to demonstrate the existence of both procedural and substantive unconscionability. See Porreca, 2013 WL 6498392, at *16 Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 4 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 (citing Quilloin, 673 F.3d at 230). “[T]he burden of establishing unconscionability lies with the party seeking to invalidate the contract, including an arbitration agreement ...” Salley, 925 A.2d at 347. Procedural unconscionability focuses on the process underlying the formation of the contract and the form and language of the agreement. Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224, 228 (3d Cir.2008). A procedurally unconscionable contract is one marked by “a lack of meaningful choice in the acceptance of the challenged provision.' ” Quillion, 673 F.3d at 236 (quoting Salley, 925 A.2d at 119). On the other hand “[a] contract or provision is substantively unconscionable where it ‘unreasonably favors the party asserting it.’ ” Id. (quoting Salley, 925 A.2d at 119). “An arbitration agreement cannot be construed as substantively unconscionable where it ‘does not alter or limit the rights and remedies available to [a] party in the arbitral forum....’ ” Quilloin, 673 F.3d at 231 (quoting Edwards v. HOVENSA, LLC, 497 F.3d 355, 364 (3d Cir.2007)). Caparra presents three reasons why the Arbitration Agreement is substantively unconscionable. First, Defendants failed to explain the terms of the Arbitration Agreement to him. (Pl.'s Opp'n Mot. Dismiss 19, 22.) Second, the Arbitration Agreement limits his ability to recover equitable and injunctive relief available to him under the ADA, the FMLA and the PHRA. (Id. at 23.) Third, the Arbitration Agreement makes him bear his own fees and expenses. (Id. at 24.) Caparra also contends that the Arbitration Agreement is a procedurally unconscionable contract of adhesion. (Id. at 14–19.) Because the Court finds that the Arbitration Agreement is not substantively unconscionable, the Court need not determine whether the Agreement is procedurally unconscionable. i. Substantive Unconscionability Caparra contends that the terms of the Arbitration Agreement are “ ‘unreasonably or grossly favorable to one side’ i.e., Defendants” because “a high-level director” David Kososki did not understand the meaning of many of the terms in the agreement. 5 (Id. at 22.) In support of this position Caparra quotes sections of Kososki's deposition where he admits that: he does not know the difference between a legal claim or an equitable claim; he does not know what a court of equity is; he does not know what a statutory or common law benefit is; he does not know what the Federal Rules of Evidence or Rules of Civil Procedure are; and he does not know the meaning of the sentence, “The arbitrator may award individual relief only.” (Id. at 19–22.) Caparra, like Kososki, does not understand the terms of the Arbitration Agreement, and “no one at Defendants ever made any effort to explain the Agreement to [him].” (Id. at 22.) 5 This argument, which challenges the procedure underlying the formation of the Arbitration Agreement, is a procedural unconscionability argument. See Alexander v. Anthony Intern., L.P., 341 F.3d 256, 265 (3d Cir.2003) (“Procedural unconscionability pertains to the process by which an agreement is reached and the form of an agreement, including the use therein of fine print and convoluted or unclear language.”) (citation omitted). The Court nevertheless considers it pursuant to Caparra's substantive unconscionability label. *6 Caparra failed to read the agreement and he did not raise any questions about its language before signing. (See Caparra Dep. 98:13–103:1, 110:9–110:21.) He contends that even if he had read the document, he would not have understood it. (Id. at 111:19–111:24.) Nevertheless, the terms of the agreement were clearly described in the document that Caparra received and signed. Under Pennsylvania law, “[c]ontracting parties are normally bound by their agreements, without regard to whether the terms thereof were read and fully understood and irrespective of whether the agreements embodied reasonable or good bargains.” Simeone v. Simeone, 581 A.2d 162, 165 (Pa.1990). Caparra cites no law for the proposition that an arbitration agreement is unconscionable because his employer failed to explain its terms. To the contrary, there is “no additional requirement to conduct an orientation to discuss the terms of the agreement with the employee and ensure that the employee understands all of its terms.” Porreca, 2013 WL 6498392, at *9; see also Morales v. Sun Constructors, Inc., 541 F.3d 218, 223 (3d Cir.2008) (enforcing arbitration agreement drafted in English against non-English speaking employee who made no effort to learn the terms of the agreement). The Court cannot find the Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 5 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Arbitration Agreement substantively unconscionable because Caparra failed to understand its terms before he signed the document. Caparra next contends that the Arbitration Agreement precludes him from seeking the equitable and injunctive relief he is entitled to under the ADA, the FMLA and the PHRA. 6 He is correct that he is entitled to seek such relief under those statutes. See 42 U.S.C. § 12117(a); 29 U.S.C. § 2617(a)(1)(B); 43 P.S. § 962(c)(3). He is incorrect, however, that the fact that the “arbitrator may award individual relief only” eliminates his right to these remedies. The Arbitration Agreement unequivocally states that the agreement “involves no surrender, by either party, of any substantive statutory or common law benefit, protection or defense for individual claims.” The “individual relief” limitation refers to the class action waiver 7 in the Arbitration Agreement; it is not a limit on the remedies available to Caparra. Moreover, should some ambiguity between the rights available under the ADA, the FMLA or the PHRA and the language of the Arbitration Agreement arise, the “Supreme Court has clearly established that ambiguities in arbitration agreements must be interpreted by the arbitrator.” Quilloin, 673 F.3d at 231 (citing PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 406–07 (2003)). The Arbitration Agreement cannot be deemed substantively unconscionable on this basis. 6 Caparra has asked the Court to “enjoin and permanently restraining [sic] the violations” and to grant “such other and further relief as this Court may deem just, proper, or equitable including other equitable and injunctive relief providing restitution for past violations and preventing future violations.” (Compl. at 12–13.) 7 Caparra has not asserted a putative class action and he raises no challenges to the class action waiver in the Arbitration Agreement. Caparra appears (though only through parentheticals appended to case citations) to contend that requiring him to bear his own costs makes the arbitral forum prohibitively expensive, which renders the Arbitration Agreement substantively unconscionable. (Pl.'s Opp'n Mot. Dismiss 24.) An arbitration agreement that requires a claimant to bear prohibitive costs may be unconscionable because such costs could deter a litigant from effectively vindicating his rights. See Nino v. Jewelry Exch., Inc., 609 F.3d 191, 203 (3d Cir.2010); Blair, 283 F.3d at 605 (“[T]he existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the arbitral forum.”). However, the mere risk that a party “will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000). A party seeking to invalidate an arbitration agreement on such grounds bears the burden of showing the likelihood of incurring such costs. Id. *7 The Arbitration Agreement states “Each party shall bear their own fees and expenses, unless otherwise awarded by the arbitrator in the final, written decision.” This plain language expressly provides the arbitrator the discretion to award Caparra fees and costs. The agreement places no limitations on the arbitrator's discretion to do so and, as discussed above, Caparra has not waived his right to recover fees, to the extent available, under the ADA, the FMLA or the PHRA. See 42 U.S.C. § 12205; 29 U.S.C. § 2617(a)(3); 43 P.S. § 962(c)(4). Despite engaging in discovery directed at the unconscionability of the Arbitration Agreement, Caparra makes no attempt to show that he will have to bear his own costs or that he is unable to pay such costs. 8 “[T]he effect of the attorney fees provision ... is, at this point, purely speculative.” (Defs.' Mot. Dismiss Ex. O, Johnson v. Brinker Int'l Payroll Co., No. 13–cv–1090, at 7 (W.D.Wash. Oct. 23, 2013) (interpreting an identical arbitration provision)). The Arbitration Agreement is not substantively unconscionable. 8 Caparra's citations to Nino v. Jewelry Exchange, Inc., 609 F.3d 191 (3d Cir.2010) and Parilla v. IAP Worldwide Services VI, Inc., 368 F.3d 269 (3d Cir.2004) lend no support to his argument. In Nino, the Third Circuit held that an arbitration provision that stated “that the fees and expenses of the arbitrator and stenographer are to be borne equally by the parties” was substantively unconscionable because its restriction on the arbitrator's ability to award attorney's fees, costs and expenses “undermine[d] the legislative intent behind fee-shifting statutes like Title VII.” Nino, 609 F.3d at 203. The Arbitration Agreement in this case does not contain a similar restriction. Similarly, the provisio n in Parilla required each party to “bear its own costs and expenses, including attorney's fees.” Parilla, 368 F.3d at 278–79. The Third Circuit held that the relinquishment of eligibility for costs, expenses and attorney's fees “clearly helps the employer” and is thus substantively unconscionable. Id. at 278. Caparra, Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 6 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 however, has not relinquished his eligibility for costs, expenses and attorney's fees under the ADA, the FMLA or the PHRA. The arbitration agreement in Parilla also required the employee to reimburse the company for the arbitrator's fees and expenses if so directed by the arbitrator. Id. at 283. While noting that “the prospect that the employee may have to pay the entire amount of the arbitrator's fees and expenses may serve to chill her willingness to bring a claim,” the court remanded the case to permit the employee to conduct limited discovery in an effort to demonstrate her inability to pay the anticipated costs of arbitration. Id. at 284–85. The Arbitration Agreement here does not saddle Caparra with a similar obligation. And even if it did, Caparra puts forth no evidence regarding his inability to pay such fees. ii. Procedural Unconscionability Caparra contends that the Arbitration Agreement is a procedurally unconscionable contract of adhesion, which is a “ ‘standard-form contract prepared by one party, to be signed by the party in a weaker position, usually a consumer, who adheres to the contract with little choice about the terms.’ ” Chepkevich v. Hidden Valley Resort, L.P., 2 A.3d 1174, 1190 (Pa.2010) (quoting Black's Law Dictionary 342 (8th ed.2004)). Under Pennsylvania law, contracts of adhesion are usually found to be procedurally unconscionable. Quilloin, 673 F.3d at 235. Nonetheless, the absence of substantive unconscionability mandates the enforcement of the Arbitration Agreement, regardless of a finding of procedural unconscionability. See Williams v. Nabors Drilling USA, LP, No. 13–cv–1013, 2014 WL 710078, at *9 (W.D.Pa. Feb. 25, 2014) (“[B]ecause the Employees failed to show substantive unconscionability, procedural unconscionability is irrelevant. The Arbitration Agreement must be enforced.”); accord Zimmer, 523 F.3d at 230 (“Because we have concluded that the arbitration agreement here was not procedurally unconscionable and reverse on that basis, we need not decide whether the District Court's decision as to substantive unconscionability was correct.”). Put another way, even if the Court, after considering the record evidence and applying the sliding scale approach, found the Arbitration Agreement was procedurally unconscionable, it would still enforce the Arbitration Agreement. Therefore, the Court need not take up Caparra's procedural unconscionability arguments. c. Scope of the Arbitration Agreement *8 Because an enforceable arbitration agreement exists, the Court must determine whether the dispute falls within the scope of the agreement. See MacDonald, 951 F.Supp.2d at 734. “[W]here the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that ‘an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.’ ” AT & T Tech., Inc. v. Commc'n Workers of Am., 475 U.S. 643, 650 (1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83(1960)). This presumption is “particularly applicable where the clause is broad.” Id. Accordingly, “if the allegations underlying the claims touch matters covered by an arbitration clause in a contract, then those claims must be arbitrated.” Brayman Const. Corp. v. Home Ins. Co., 319 F.3d 622, 626 (3d Cir.2003) (internal quotation marks and citation omitted). The parties agreed to arbitrate “any legal or equitable claims or disputes arising out of or in connection with employment, terms and conditions of employment, or the termination of employment ...” This broad language clearly encompasses Caparra's ADA and PHRA discrimination claims as well as his FMLA interference and retaliation claims. Caparra makes no argument to the contrary. The Court accordingly finds that the Arbitration Agreement is a valid, enforceable contract requiring Caparra to arbitrate the claims set forth in his complaint. d. Claims Against Brinker International and Maggiano's Must Also Be Arbitrated Finally, Caparra asserts that he cannot be compelled to arbitrate his claims against Brinker International and Maggiano's because they did not sign the Arbitration Agreement. (Pl.'s Opp'n Mot. Dismiss 6–10.) Even assuming that Caparra Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 7 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 was employed by one or both of these entities—as he contends—his joinder of these defendants does not mandate the conclusion that he need not arbitrate his claims against them. A non-signatory to a contract may bind a signatory to arbitrate a dispute when “traditional principles of state law allow a contract to be enforced by or against non-parties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel.” Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 631 (2009) (internal quotation marks omitted). “In the wake of Arthur Anderson ... we must expressly consider whether the relevant state contract law recognizes the particular principle as a ground for enforcing contracts by or against third parties.” Flintkote Co. v. Aviva PLC, 769 F.3d 215, 220 (3d Cir.2014) (internal quotation marks omitted). Pennsylvania law embraces the theory of equitable estoppel. Griswold v. Coventry First LLC, 762 F.3d 264, 271 (3d Cir.2014) (citing Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa.Super.Ct.2006)). Under Dodds, “[n]on-signatories to an arbitration agreement can enforce such an agreement when there is an obvious and close nexus between the non- signatories and the contract or the contracting parties.” 909 A.2d at 351. The Dodds plaintiffs signed an arbitration agreement with Pulte Home Corporation of the Delaware Valley (“Pulte Home”) and agreed that “any controversy, claim or dispute arising out of or relating to this Agreement or purchase of the Home ... shall be settled by arbitration.” Id. at 350. The plaintiffs asserted a fraud claim against Pulte Home's parent company, who had not signed the arbitration agreement, in an effort to avoid arbitration. Id. at 351. Because the interests of the parent company were the same as Pulte Home, the Dodds plaintiffs could not avoid the arbitration agreement by asserting a fraud claim against the parent company. Id. at 352. Here, Caparra lumps together non-signatory affiliated entities, Brinker International and Maggiano's, with signatory affiliated entity Brinker Payroll, and alleges that the Defendants are collectively liable as his employer. (See, e.g., Compl.¶¶ 23, 41, 42, 43, 44, 46, 47, 48, 49.) Caparra's claims against the Defendants are indistinguishable as they stem from the same incident and implicate identical legal principles. Permitting simultaneous litigation and arbitration of these identical claims runs the risk of different fact finders interpreting identical fact patterns differently and unnecessarily wastes judicial resources. See Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1272 (Pa.Super.Ct.2004) (“[I]n disputes involving identical facts, we have an interest in obtaining consistent results and avoiding an unnecessary waste of resources.”). Moreover, Caparra, a signatory to the arbitration agreement, “should not be able to avoid the requirement to arbitrate by a non-signatory when the non-signatory wants to arbitrate.” Dodds, 909 A.2d at 352; see also Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1112 (3d Cir.1993) (holding that claims against non-signatory “corporate sister” of signatory corporation fell within the scope of an arbitration agreement because plaintiff's theory of liability demonstrated that corporate sister's interests were “directly related to, if not predicated upon” the alleged wrongful conduct). Any other result would permit a party to “obviate the effect of the agreement merely by finding a way to join another party.” Dodds, 909 A.2d at 352; see also Arnold v. Arnold Corp.-Printed Commc'ns For Bus., 920 F.2d 1269, 1281 (6th Cir.1990) (“[I]f appellant can avoid the practical consequences of an agreement to arbitrate by naming non-signatory parties as defendants in his complaint, or signatory parties in their individual capacities only, the effect of the rule requiring arbitration would, in effect, be nullified.”) (internal quotation marks omitted). The Court accordingly finds that Caparra must arbitrate his claims against Brinker International and Maggiano's. IV. Conclusion *9 The FAA directs that if a case referable to arbitration is brought in federal court, the court before which the lawsuit is pending “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3. This section “affords district courts no discretion to dismiss a case where one of the parties applies for a stay pending arbitration.” Lloyd v. HOVENSA, LLC, 369 F.3d 263, 269 (3d Cir.2004). Defendants move to dismiss the complaint; they did not request a stay. Nevertheless, Caparra appears to request a stay in opposition to the Defendants' motion. (See Pl.'s Opp'n Mot. Dismiss 25.) A stay furthers both the Defendants' interests in compelling arbitration and judicial economy. See Lloyd, 369 F.3d at 270 (noting that entering a stay expedites judicial resolution of disputes for which the parties are entitled to seek the Court's assistance during Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 8 of 9 Caparra v. Maggiano's Inc., Not Reported in F.Supp.3d (2015) 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 arbitration and ensures that the parties proceed immediately to arbitration). Accordingly, this case will be stayed, and administratively closed, pending the resolution of arbitration. Cf. Somerset Consulting, LLC v. United Capital Lenders, LLC, 832 F.Supp.2d 474, 490 (E.D.Pa.2011) (dismissing case because “neither plaintiffs nor defendants have requested that we stay the action pending arbitration”). An appropriate Order follows. ORDER AND NOW, this 1st day of September, 2015, upon consideration of Defendants' Renewed Motion to Dismiss Complaint and to Compel Arbitration (ECF No. 16), Plaintiff's response in opposition (ECF. No. 18), and Defendants' reply (ECF No. 19), it is ORDERED that the motion is GRANTED in part. The parties shall arbitrate the claims raised in Plaintiff's Complaint (ECF No. 1) in accordance with the parties' enforceable arbitration agreement. It is further ORDERED that this action shall be stayed and placed in CIVIL SUSPENSE pending the outcome of the arbitration. All Citations Not Reported in F.Supp.3d, 2015 WL 5144030, 25 Wage & Hour Cas.2d (BNA) 773, 32 A.D. Cases 38 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-4 Filed 06/27/17 Page 9 of 9 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2017 WL 2572517 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. Julieann COLON, on behalf of herself and all others similarly situated, Plaintiff, v. CONCHETTA, INC. d/b/a Club Risque; RT, 413, Inc. d/b/a Club Risque; Tacony 2008 Inc. d/b/a Club Risque; Connie Innezzelli; Dean M. Pagano; Ronald Crudele; Theodore Pagano Jr; and Doe Defendants 1-10, Defendants. CIVIL ACTION No. 17-0959 | Filed 06/14/2017 Attorneys and Law Firms Gerald D. Wells, III, Connolly Wells & Gray, LLP, King of Prussia, PA, for Plaintiff. Luke Lirot, Luke Charles Lirot, P.A., Clearwater, FL, Marlo Pagano-Kelleher, The Pagano Law Firm, Media, PA, Matthew J. Hoffer, Shafer & Associates PC, Lansing, MI, for Defendants. MEMORANDUM ROBERT F. KELLY, Sr., District Judge *1 Presently before the Court is the Motion to Compel Arbitration and Dismiss the Proceedings, and Stay Discovery filed by Defendants Conchetta Inc. d/b/a Club Risque, RT 413, Inc. d/b/a Club Risque, Tacony 2008 Inc. d/b/a Club Risque, Connie Innezzelli (“Innezzelli”), Dean M. Pagano, Ronald Crudele (“Crudele”), Theodore Pagano Jr., and Doe Defendants 1-10 (collectively “Defendants”), Plaintiff Julieann Colon's (“Colon”) Response in Opposition, Defendants' Reply Brief, and Colon's Notice of Supplemental Authority. For the reasons noted below, we grant Defendants' Motion. I. BACKGROUND On March 2, 2017, Colon filed the present class action before this Court alleging federal and Pennsylvania state wage violations. Specifically, Colon claims she was an exotic dancer at various entities doing business as “Club Risque.” (Compl. ¶ 12.) The essence of her Complaint is that she and others are entitled to damages because Defendants improperly classify exotic dancers as “independent contractors.” (Id. ¶¶ 12, 33.) Thus, Colon claims that the Defendants have, inter alia, violated federal and Pennsylvania state law relating to the failure to pay the applicable minimum wage; failure to pay overtime compensation in excess of forty hours; improper collection of a portion of tips the dancers receive from the public; and improper subsidization of the businesses by requiring a portion of tips to be forfeited to management and employees who do not regularly receive tips. (Id. ¶ 3.) On April 11, 2017, Defendants filed a Motion to Compel Arbitration and Dismiss the Proceedings, and to Stay Discovery Pending Determination of the Motion, which relies upon an arbitration provision contained in a “Performer License and Temporary Space Lease Agreement” (the “Agreement”). (Defs' Brief; Ex. A § 16.) Colon filed a Response in Opposition, Defendants filed a Reply Brief, and Colon filed a Notice of Supplemental Authority. Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 1 of 7 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 II. LEGAL STANDARD In order to determine whether a valid arbitration agreement exists, we must initially decide whether that determination is made under Federal Rule of Civil Procedure 12(b)(6) or 56, and thus, what materials may be considered. See Sanford v. Bracewell & Guiliani, LLP, 618 Fed.Appx. 114, 117 (3d Cir. 2015). “Motions to compel arbitration are reviewed under Rule 12(b)(6) ‘[w]here the affirmative defense of arbitrability of claims is apparent on the face of a complaint (or ... documents relied upon in the complaint).’ ” Id. (quoting Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773–74 (3d Cir. 2013)). “If the motion to compel arbitration is not based on a complaint ‘with the requisite clarity’ to establish arbitrability or ‘the opposing party has come forth with reliable evidence that is more than a naked assertion that it did not intend to be bound by the arbitration agreement, even though on the face of the pleadings it appears that it did,’ resort to discovery and Rule 56 is proper.” Id. (ellipsis omitted) (quoting Guidotti, 716 F.3d at 774). *2 Colon does not mention the Agreement in her Complaint, although it is clearly integral to her claims. See Hewitt v. Rose Grp., No. 15-5992, 2016 WL 2893350, at *2 n.1 (E.D. Pa. Mar. 21, 2016) (“It would frustrate the purposes of the Federal Arbitration Act if plaintiffs could avoid having their claims quickly compelled to arbitration simply by failing to mention the existence of clearly applicable arbitration agreements in their complaints.”). Defendants attached the Agreement to their Brief, and Colon does not contest its authenticity. Indeed, Colon admits to signing the Agreement on February 18, 2015. (Pl.'s Resp. in Opp'n at 11.) Because there is no question that the Agreement is integral to Colon's claims and no dispute of its authenticity, we will consider it. Finding that arbitrability is facially established, the Rule 12(b)(6) standard applies. See Guidotti, 716 F.3d at 776 (stating under the Rule 12(b)(6) standard, “[w]e consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents”) (citation omitted); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (stating that even if a “[c]omplaint does not explicitly refer to or cite [a document] ... the critical [issue] is whether the claims in the complaint are ‘based’ on an extrinsic document and not merely whether the extrinsic document was explicitly cited”); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (“[A] court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document. Otherwise, a plaintiff with a legally deficient claim could survive a motion to dismiss simply by failing to attach a dispositive document on which it relied.”). Thus, pursuant to Federal Rule of Civil Procedure 12(b) (6), we accept as true the facts plead in the Complaint construing them in the light most favorable to Colon. See Fed. R. Civ. P. 12(b)(6). We also note that no discovery is needed because any further development of the factual record is unnecessary to decide the instant Motion. Therefore, we deny Colon's request for discovery. III. DISCUSSION The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., “creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes.” Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 522 (3d Cir. 2009). The FAA provides that “ ‘[a] written provision’ in a maritime or commercial contract showing an agreement to settle disputes by arbitration ‘shall be valid, irrevocable, and enforceable, save upon grounds as exist in law or in equity for the revocation of any contract.’ ” Id. (quoting 9 U.S.C. § 2). “Because arbitration is a matter of contract, before compelling arbitration pursuant to the Federal Arbitration Act, a court must determine that (1) a valid agreement to arbitrate exists, and (2) the particular dispute falls within the scope of that agreement.” Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009). A. The Agreement to Arbitrate Arbitrability Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 2 of 7 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 At the outset, Defendants assert that any challenge Colon makes regarding the Agreement or the arbitration clause must be submitted to the arbitrator. (See Defs' Brief at 10.) In other words, Defendants claim that, pursuant to the express language in the Agreement, any argument concerning the validity, enforceability, or scope of the Agreement or arbitration provision must be decided by the arbitrator, not the Court. (See id.) *3 In Rent-A-Center, West, Inc. v. Jackson, the Supreme Court of the United States (“Supreme Court”) clarified how courts are to decide a challenge to an arbitration agreement that contains a provision requiring arbitration of “gateway questions of arbitrability, such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” 561 U.S. 63, 70 (2010) (internal quotation marks omitted). The Court noted a distinction between a challenge to the arbitration agreement as a whole, and a challenge to the agreement to arbitrate arbitrability. See Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 229 (3d Cir. 2012) (“To eliminate the confusion caused by an agreement to arbitrate nested within another agreement to arbitrate, the Rent-A-Center Court found it necessary to distinguish between the overall arbitration agreement (the ‘contract’), and the agreement to arbitrate arbitrability (the ‘delegation clause’).”). The latter is referred to as a “delegation provision,” which is “an agreement to arbitrate threshold issues concerning the arbitration agreement.” Rent-A-Center, 561 U.S. at 68. “An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.” Id. at 70. Although “questions of arbitrability, including challenges to an arbitration agreement's validity, are presumed to be questions for judicial determination.... [c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable’ evidence that they did so.” Quilloin, 673 F.3d at 228 (alterations omitted) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). Significantly, unless the party opposing arbitration challenges the delegation provision specifically, “we must treat it as valid under § 2 [of the FAA], and must enforce it under §§ 3 and 4, leaving any challenge to the validity of the Agreement as a whole for the arbitrator.” Rent-A-Center, 561 U.S. at 72. We must first look to whether there is clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. See Quilloin, 673 F.3d at 228 (quoting First Options, 514 U.S. at 944). The arbitration provision in the Agreement provides as follows: The parties agree that this Agreement is subject to binding arbitration pursuant to the Federal Arbitration Act (the “FAA”), and any disputes under this Agreement, as well as any disputes that may have arisen at any time during the relationship between the parties, and will be governed by the following: * * * * * * 3. Scope of Arbitration and Arbitrability Reserved to the Arbitrator This provision's purpose is to ensure that an arbitrator—not a court—will decide ALL federal, state, statutory, and common law claims between the Parties and to ensure that the class action waiver provision will apply to all such claims regardless of whether there are any pending collective or class actions pending at the time the agreement is entered. The Parties expressly agree that the arbitrator will decide all issues in the first instance, including, but not limited to all gateway questions of arbitrability concerning: substantive arbitrability; the scope of this arbitration provision; the provision's applicability to a particular dispute; procedural arbitrability; whether the Parties have complied with this arbitration provision; the validity and enforceability of the Agreement as a whole; the validity and enforceability of the arbitration provision; and whether the arbitration clause is substantively or procedurally unconscionable. ... Should Performer attempt to disavow the nature of the Parties' relationship of its classification as an Independent Performer, Licensee and Temporary Space Lessee, and not an “employee,” such challenges will be heard exclusively by the arbitrator, not a court. Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 3 of 7 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 (Defs' Brief; Ex. A § 16.) (italics added) Based on the language above, we find there is clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. Indeed, the language could not be clearer that the parties have agreed that the arbitrator will decide all threshold issues. *4 Colon mounts a number of challenges to the Agreement and arbitration provision. She first argues that the Agreement is inapplicable to her claims because her claims are outside the scope of the Agreement. (Pl.'s Resp. in Opp'n at 7-9.) She further argues that the Agreement is illusory and that the Agreement and arbitration clause are unconscionable due to their one-sided nature. (Id. at 9-19.) Lastly, she asserts the arbitration agreement violates the National Labor Relations Act (“NLRA”), 29 U.S.C. §§ 151-169, because the class action waiver inhibits the dancers' collective adjudication rights. (Id. at 19-24.) All of Colon's arguments suffer from the same deficiency as the plaintiff's arguments in Rent-A-Center. In Rent-A- Center, all of the plaintiff's challenges related to the enforceability of the arbitration agreement as a whole, rather than a specific challenge to the arbitration agreement's delegation clause. Rent-A-Center, 561 U.S. at 72. As a result, because the plaintiff failed to challenge the delegation clause specifically, the Supreme Court held that the agreement to arbitrate arbitrability was valid under § 2 of the FAA and enforceable under §§ 3 and 4. Id. Like the plaintiff in Rent-A-Center, all of Colon's arguments concern the Agreement overall or simply the arbitration provision in general. In her Response in Opposition, we recognize that Colon does quote the delegation clause in its entirety. (Pl.'s Resp. in Opp'n at 12.) However, the reference appears only for procedural and factual purposes and does not serve as the basis for any substantive argument. (See id.) As Defendants note in their Reply Brief, Colon has failed to assert any argument levied specifically towards the delegation clause. (Defs' Reply Br. at 8.) Colon's arguments regarding scope, whether the Agreement is illusory, unconscionability, and any violation of the NLRA miss the mark because a valid delegation clause is severable from the remainder of the contract and is unaffected by the contract's validity. See Quilloin, 673 F.3d at 229. Pursuant to the language in the Agreement, all of Colon's challenges are for the arbitrator to decide, not this Court. Accordingly, any questions of arbitrability must go to the arbitrator. B. Arbitration Will Be Ordered For All Defendants Now that we have determined that the questions regarding arbitrability are to be decided by the arbitrator, the question remains as to whether Colon must arbitrate her claims against all of the Defendants. Colon argues that she does not have to arbitrate her claims against most of the Defendants because they were non-signatories to the Agreement. (Pl.'s Resp. in Opp'n at 24.) Although she is correct that a number of the Defendants did not actually sign the Agreement, we reject her argument and order arbitration as to all Defendants. The gravamen of Colon's argument is that the Agreement was signed between Defendant Conchetta, Inc. d/b/a Club Risque (identified in the Agreement as “the Club”) and herself. (Id. at 24, 25; see also Defs' Brief; Ex. A at 1, 6.) Thus, in her view, Defendants Innezzelli, Dean M. Pagano, Crudele, Theodore Pagano Jr., and Doe Defendants 1-10 cannot compel her to arbitrate her claims because there was no mutual assent to be bound by the terms of the arbitration agreement. (Pl.'s Resp. in Opp'n at 26.) In their Reply Brief, Defendants argue that Colon must arbitrate her claims against all Defendants based on the theories of agency, equitable estoppel, and alter ego. (Defs' Reply Br. at 10-14.) Because the theories of agency and equitable estoppel clearly allow the non-signatories to compel arbitration of Colon's claims against them, we need not address alter ego. 1. Agency *5 The United States Court of Appeals for the Third Circuit (“Third Circuit”) has recognized that a non-signatory to an arbitration agreement may compel a signatory to arbitrate claims based under a traditional agency theory. See Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1121 (3d Cir. 1993). “To bind a principal by its agent's acts, Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 4 of 7 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 the plaintiff must demonstrate that the agent was acting on behalf of the principal and that the cause of action arises out of that relationship.” E.I. DuPont de Nemours and Co. v. Rhone Poulenc Fiber and Resin Intermediates, S.A.S., 269 F.3d 187, 199 (3d Cir. 2001). “Because a principal is bound under the terms of a valid arbitration clause, its agents, employees, and representatives are also covered under the terms of such agreements.” Pritzker, 7 F.3d at 1121. Here, Colon's own pleading belies her argument that all of the Defendants, except Conchetta, Inc. d/b/a Club Risque, cannot compel arbitration because they were non-signatories to the Agreement. In her Complaint, Colon alleges [u]pon information and belief ... at all relevant times each defendant was the officer, director, employee, agent, representative, alter ego, or co-conspirator of each of the other defendants. In engaging in the alleged conduct herein, defendants acted in the course, scope of, and in furtherance of the aforementioned relationship. Accordingly, unless otherwise specified herein, Plaintiff will refer to all defendants collectively as “Defendants” and each allegation pertains to each of the defendants. (Compl. ¶ 26.) Third Circuit precedent dictates that agents, employees, and representatives are covered under the arbitration clause of a principal. See Pritzker, 7 F.3d at 1121. Taking the allegations in Colon's Complaint as true, as we must, we find that all of the Defendants are covered by the arbitration agreement based on the theory of agency. 2. Equitable Estoppel “A non-signatory to a contract may bind a signatory to arbitrate a dispute when ‘traditional principles of state law allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel.’ ” Torres v. CleanNet, U.S.A., Inc., 90 F. Supp. 3d 369, 379 (E.D. Pa. 2015) (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009)). Pennsylvania law allows for a theory of equitable estoppel. Griswold v. Coventry First LLC, 762 F.3d 264, 271 (3d Cir. 2014). In DuPont, the Third Circuit outlined two theories of equitable estoppel that may apply in the arbitration context. DuPont, 269 F.3d at 199-200. Under the first theory, “courts have held non-signatories to an arbitration clause when the non-signatory knowingly exploits the agreement containing the arbitration clause despite having never signed the agreement.” Id. at 199 (citing Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773, 778 (2d Cir. 1995)). Under the second, “courts have bound a signatory to arbitrate with a non-signatory at the nonsignatory's insistence because of the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and the fact that the claims were intimately founded in and intertwined with the underlying contract obligations.” Id. (citing Thomson, 64 F.3d at 779) (internal quotation marks and alteration omitted). The first theory of equitable estoppel has no application in the instant matter because Colon, a signatory to the Agreement, is seeking to avoid the compulsion of arbitration asserted by non-signatories. Thus, the second theory of equitable estoppel, commonly known as “alternative estoppel,” see White v. Sunoco Inc., 189 F. Supp. 3d 486, 494 (E.D. Pa. 2016), is more appropriate. As noted above, in order for alternative estoppel to apply, a non-signatory must establish (1) a close relationship between the entities involved; and (2) the claims against it are intimately founded in and intertwined with the underlying contractual obligations. Torres, 90 F. Supp. 3d at 379 (citing Griswold, 762 F.3d at 272). “ ‘Claims are intertwined with an arbitration agreement when the signatory's claims rely on the terms of the agreement or assume the existence of, arise out of, or relate directly to, the written agreement.’ ” Id. (quoting Booth v. BMO Harris Bank, N.A., No. 13-5968, 2014 WL 3952945, at *6 (E.D. Pa. Aug. 11, 2014)). *6 Here, the first prong of the alternative estoppel theory is met because Colon pleads that there is a close relationship between the entities involved. In her Complaint, Colon asserts that Defendants Innezzelli, Dean M. Pagano, Crudele, and Theodore Pagano, Jr. “own[ ] and operate” the various Club Risque locations. (Compl. ¶¶ 14, 17, 18, 20, 21, 23.) She specifically pleads that Defendants Innezzelli and Crudele are the presidents of Conchetta, Inc. and Tacony 2008, Inc., Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 5 of 7 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 respectively. (Id. ¶¶ 14, 15.) Further, she claims that “Defendants are a single and joint employer with a high degree of interrelated and unified operations. Each of these Defendants shares the common labor policies and practices complained of herein. Indeed, upon information and belief, the sole reason for separate corporate entities was to limit the liability of each of the Defendants.” (Id. ¶ 25.) As noted above, Colon also claims each defendant was an “officer, director, employee, agent, representative, alter ego, or co-conspirator of each of the other defendants.” (Id. ¶ 26.) Thus, according to the Complaint, the various owners and presidents of the Club Risque entities by definition have a close relationship with one another. Accordingly, the first prong of the alternative estoppel doctrine is satisfied. We also find that Colon's claims are “intimately founded in and intertwined with the underlying contract obligations.” DuPont, 269 F.3d at 199. The second prong is met when “the signatory's claims rely on the terms of the agreement or assume the existence of, arise out of, or relate directly to, the written agreement.” Torres, 90 F. Supp. 3d at 379 (quoting Booth, 2014 WL 3952945, at *6). Interestingly, Colon does not even reference the Agreement in her Complaint, much less attach it as an exhibit. However, we find that fact to be irrelevant, as the genesis of her claims clearly stems from the Agreement she entered into. For example, she claims “Defendants ... improperly classified Plaintiff and other exotic entertainers (‘Dancers') as ‘independent contractors.’ Consequently, Defendants failed to pay Plaintiff and its Dancers at least the applicable minimum wage, as well as premium overtime compensation for hours worked in excess of forty.” (Compl. ¶ 3; see also ¶¶ 12, 33.) (footnote omitted). Colon's challenge to being classified as an independent contractor necessarily assumes the existence of, arises out of, and relates directly to the Agreement. After all, the Agreement is the very document she signed that categorizes her as an independent contractor. (See Defs' Brief; Ex. A) She even acknowledges this fact in her Response in Opposition when she states that she was given the option of being classified as an “employee” or a “licensee and temporary space lessee.” (Pl.'s Resp. in Opp'n at 17.) She provides, “[o]stensibly, a Licensee and Temporary Space Lessee is an independent contractor.” (Id.) Additionally, she argues that if the Agreement stands, it would effectively constitute a waiver of her statutory rights, which she claims is impermissible under federal and state law. (Id. at 20.) Accordingly, we find that Colon's wage loss claims are founded in, and intertwined with, the underlying contractual obligations. Therefore, Colon is equitably estopped from challenging arbitration as to the non-signatory Defendants. We also note that we find it would be completely inequitable to disallow the non-signatories from compelling arbitration in light of Colon's allegations of collective wrongdoing by the Defendants. “Estoppel may also apply where the nonsignatory is alleged to have engaged in ‘substantially interdependent and concerted misconduct’ with a signatory other than the plaintiff.” Sarl v. A.M. Todd Co., No. 07-2727, 2008 WL 724607, at *10 (E.D. Pa. Mar. 18, 2008) (quoting Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir. 2000)). Here, Colon has alleged that each Defendant is a “single and joint employer with a high degree of interrelated and unified operations” and grouped each of the Defendants together, as “each allegation pertains to each of the defendants.” (Compl. ¶¶ 25, 26.) Colon's Complaint asserts violations of federal and state wage law against all of the Defendants based on their classification of her as an independent contractor. (Id. ¶ 3.) Thus, Colon has grouped all of the Defendants together for purposes of imposing liability, but seeks to avoid arbitration against the non-signatories because they did not sign the Agreement. According to Colon's Complaint, all of the theories of wage violations are applicable to each and every Defendant. Therefore, we find that her allegations of substantially interdependent and concerted misconduct dictate that all of the Defendants are covered under the arbitration agreement pursuant to the equitable estoppel doctrine. C. Dismissal or Stay of Proceedings *7 If a case referable to arbitration is brought in federal court, the FAA directs that the court before which the lawsuit is pending “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3. “The plain language of § 3 affords a district court no discretion to dismiss a case where one of the parties applies for a stay pending arbitration.” Lloyd v. Hovensa, LLC, 369 F.3d 263, 269 (3d Cir. 2004); see also Devon Robotics, LLC v. DeViedma, 798 F.3d 136, 143-44 (3d Cir. 2015). Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 6 of 7 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 In this matter, Defendants request a stay in full in their Reply Brief. (See Defs' Reply Br. at 3, 21.) Accordingly, we will stay the case and administratively close it pending the resolution of arbitration. IV. CONCLUSION The parties have shown clear and unmistakable evidence that they agreed to delegate all threshold issues regarding arbitrability to the arbitrator. Supreme Court and Third Circuit precedent dictates that unless a party challenges the specific agreement to arbitrate arbitrability (i.e., the delegation clause), the provision is severable from the remainder of the contract and is valid under § 2 of the FAA and enforceable under §§ 3 and 4. Because Colon does not specifically challenge the delegation clause in the Agreement, it is fully enforceable under binding precedent. Further, we find that the principles of agency and equitable estoppel are applicable in this matter, and we will order arbitration as to all Defendants. Lastly, in light of Defendants' request for a stay, we will stay this matter and administratively close it pending the resolution of arbitration. An appropriate Order follows. All Citations Slip Copy, 2017 WL 2572517 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-5 Filed 06/27/17 Page 7 of 7 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2016 WL 928667 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. Esis, Inc., Plaintiff, v. Coventry Health Care Workers Compensation, Inc., Defendant. Esis, Inc., Plaintiff, v. Concentra Integrated Services, Inc., Defendant/Third Party Plaintiff, v. Aetna, Inc., and Aetna Workers' Comp Access, LLC, Third Party Defendants. CIVIL ACTION NOS. 13-2957, 13-2998 | Signed 03/09/2016 MEMORANDUM DuBois, J. I. INTRODUCTION *1 This case arises out of the servicing of workers compensation claims by a variety of corporations, including the parties in this litigation. Presently before the Court is Aetna Inc. and Aetna Workers' Comp Access LLC's Motion to Dismiss Concentra Integrated Services, Inc.'s Second Amended Third Party Complaint. For the reasons that follow, the Court grants the Motion and dismisses the Second Amended Third Party Complaint with prejudice. II. BACKGROUND A. Procedural History Plaintiff in the underlying action, ESIS, Inc. (“ESIS”), is a claims administrator that manages workers compensation claims on behalf of its clients, primarily employers and insurance companies. ESIS contracts with various managed care providers to provide medical services to workers compensation claimants. On March 22, 2013, ESIS filed a Complaint in the Court of Common Pleas of Philadelphia County against one of its contractual managed care providers, Coventry Health Care Systems, Inc., alleging breach of contract and other claims. On April 2, 2013, ESIS filed a similar Complaint in the Court of Common Pleas of Philadelphia County against another managed care provider, Concentra Integrated Services, Inc. (“Concentra”). Both actions were removed to this Court. 1 By Order dated November 5, 2013, the Court granted ESIS's Unopposed Motion to Consolidate and consolidated the two cases for case management, discovery, and all other pretrial matters. 1 There is diversity jurisdiction under 28 U.S.C. § 1332. ESIS is a Pennsylvania corporation with its principal place of business in Pennsylvania. Coventry is a Delaware corporation with its principal place of business in Maryland. Concentra is a Massachusetts corporation with its principal place of business in Massachusetts. The amount in controversy in each case exceeds $75,000 exclusive of interest and costs. Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 1 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 The instant Motion involves only the Concentra action. By Stipulation dated September 3, 2015, ESIS, Concentra, and Coventry agreed to allow Concentra to implead Aetna Inc. (“Aetna”) and Aetna Workers Comp Access LLC (“AWCA”) (collectively “the Aetna defendants”). The Stipulation was entered as an Order of the Court on September 8, 2015, and Concentra filed its Third Party Complaint against the Aetna defendants on that date. Following a Stipulation and Order granting an extension of time to respond to the Third Party Complaint, on November 16, 2015, the Aetna defendants filed a Motion to Dismiss the Third Party Complaint. On December 8, 2015, Concentra filed a First Amended Third Party Complaint as of right pursuant to Federal Rule of Civil Procedure 15(a)(1)(B). On December 21, 2015, the Aetna defendants filed a Motion to Dismiss the First Amended Third Party Complaint. With the Aetna defendants' consent, by Order dated January 15, 2016, the Court granted Concentra leave to file a Second Amended Third Party Complaint, which was deemed filed on that date. On January 25, 2016, the Aetna defendants filed the Motion to Dismiss Concentra's Second Amended Third Party Complaint, presently before the Court. B. Facts Alleged in Concentra' Second Amended Third Party Complaint *2 The facts of this case as relevant to the instant Motion and set forth in Concentra's Second Amended Third Party Complaint and attached exhibits are as follows. ESIS contracted with Concentra to provide managed care services for workers compensation claims, including bill review services. Concentra, in turn, entered into preferred provider organization (“PPO”) agreements with medical providers, often through intermediary corporations, to obtain discounted rates for managed care services provided to workers compensation claimants. In the underlying action, ESIS alleges that Concentra breached obligations under a Services Agreement. Second Amended Third Party Compl. ¶ 6 (hereinafter “Compl.”). Pursuant to that Agreement, Concentra was to provide to ESIS, inter alia, “bill review services to capture reductions in fees for usual and customary and/or fee scheduled adjustments as well as application of [PPO] and pharmacy program discounts.” Compl. ¶ 7. ESIS has asserted breach of contract and indemnity claims against Concentra for losses incurred by ESIS's customers as a result of claims for additional compensation brought by medical providers located in Virginia. Compl. ¶ 9. 2 2 The provider claims, which are not directly relevant to the instant Motion, are based on alleged failure by ESIS to pay the correct rates to medical care providers due to improperly calculated PPO discounts. Notice of Removal, Ex. 2, Compl. ¶ 13. ESIS alleges that the aggregate of these medical provider claims exceeds $1.6 million and claims that $400,000 of those claims are attributable to the actions of Concentra. Notice of Removal, Ex. 2, Compl. ¶ 16 During the relevant time period, Concentra's wholly owned subsidiary, FOCUS Healthcare Management, Inc. (“FOCUS”) had an extensive network of healthcare providers that Concentra's clients could access. Compl. ¶ 11. 3 In certain states, FOCUS contracted with other healthcare provider networks to provide its customers with access to more providers. Compl. ¶ 12. In Virginia, FOCUS entered into a Master Business Agreement (“MBA”) with AWCA, a wholly owned subsidiary of Aetna, to provide access to the Aetna defendants' healthcare provider network. Compl. ¶ 13; see Compl. Ex. C (hereinafter “MBA”). 3 In 2007, Concentra sold FOCUS to Coventry. Compl. ¶ 11 n.2. As relevant here, the MBA requires AWCA to provide FOCUS with certain “Participating Provider Network Services.” MBA § 2.1. The MBA includes a contractual indemnification provision that compels each party to “indemnify and hold harmless the other party...against any and all claims, lawsuits, judgment, settlements and expenses...caused by the gross negligence or willful misconduct of the other party hereto or breach by the other party hereto of its obligations under this agreement.” MBA § 7.1. The MBA also has an “entire agreement” provision that states Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 2 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 The terms and conditions of this Agreement, and any amendment hereto, will be binding on the parties, their successors, or other transferees for the benefit of the other party and its Affiliates and their successors and assigns. MBA § 9.11. “Affiliates” are defined by the MBA as “[a]ny company that (i) controls, (ii) is controlled by, or (iii) is under common control with either party or its parent corporation.” MBA § 1.1. In addition, the MBA contains a survival clause, which provides: The provisions ... of this Agreement or any Schedule will survive the termination, cancellation, or expiration of this Agreement or Schedule. Such provisions will be binding on either party, its successors and assigns for the benefit of Aetna and its affiliates or subsidiaries and their successors and assigns. MBA § 9.10. *3 Importantly, the MBA includes a binding arbitration provision in a section entitled “Resolution of Disputes and Complaints,” which necessitates, inter alia, that [i]n the event a dispute concerning this Agreement cannot be satisfactorily resolved except for temporary, preliminary, or permanent injunctive relief or any other form of equitable relief, the dispute will be settled by arbitration in accordance with the commercial rules and regulations of the American Arbitration Association then in effect....The results of the arbitration will be final and binding on both parties. MBA § 5. C. Allegations in Second Amended Third Party Complaint and Motion to Dismiss In the Second Amended Third Party Complaint, Concentra argues that “if it is determined that Concentra is liable to ESIS in the ESIS Case, it is by reason, in whole or in part, of the acts and/or omissions” of the Aetna defendants. Compl. ¶ 10. Concentra further avers that “many of the alleged claims being asserted by ESIS against Concentra...were actually the result of the alleged negligent conduct of [the Aetna defendants] in providing inadequate/insufficient notice to the healthcare providers purportedly in Aetna's Virginia Network about providers' enrollment or re-enrollment in new PPO program(s).” Compl. ¶ 17. Concentra asserts four claims against the Aetna defendants: (1) a claim for negligent misrepresentation; (2) a claim for negligence; (3) a claim for “common law indemnity”; and (4) a claim for promissory estoppel. In the Motion to Dismiss, the Aetna defendants argue that Concentra's claims are barred in their entirety by the mandatory arbitration clause in the MBA. To the extent that Concentra asserts that it is not bound by the MBA, the Aetna defendants maintain that Concentra's tort claims fail as a matter of law in the absence of a contractual agreement. III. LEGAL STANDARD Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that, in response to a pleading, a defense of “failure to state a claim upon which relief can be granted” may be raised by motion to dismiss. To survive a motion to dismiss, a plaintiff must allege facts that “'raise a right to relief above the speculative level.' +” Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A complaint must contain “sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' +” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). A district court first identifies those factual allegations that constitute Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 3 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 nothing more than “legal conclusions” or “naked assertions.” Twombly, 550 U.S. at 555, 557. Such allegations are “not entitled to the assumption of truth” and must be disregarded. Iqbal, 556 U.S. at 679. The court then assesses “the 'nub' of the plaintiff['s] complaint—the well-pleaded, nonconclusory factual allegation [s]”—to determine whether it states a plausible claim for relief. Id. “In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents.” Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010). IV. DISCUSSION A. MBA and Mandatory Arbitration Provision *4 In an attempt to avoid the MBA's mandatory arbitration provision, Concentra argues that it “was never a party to or assignee of the...MBA” and is “not subject to its terms.” Concentra's argument is unavailing because Concentra is bound by the MBA as an affiliate of FOCUS. In ruling on a Motion to Dismiss, “[w]here the written terms of the contract are not ambiguous and can only be read one way, the court will interpret the contract as a matter of law.” Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir. 1994). The test for ambiguity is whether “the words of the contract are capable of more than one objectively reasonable interpretation....” Baldwin v. Univ. of Pittsburgh Med. Ctr., 636 F.3d 69, 76 (3d Cir. 2011). Courts should read contracts “to avoid ambiguities if possible.” Accurso v. Infra-Red Servs., Inc., 23 F. Supp. 3d 494, 505 (E.D. Pa. 2014) (quoting Nationwide Mut. Ins. Co. v. Chiao, 186 Fed. App'x. 181, 185 (3d Cir. 2006)). At the time the MBA was in force, Concentra was an affiliate of FOCUS. The MBA defines “affiliate” as Any company that (i) controls, (ii) is controlled by, or (iii) is under common control with either party or its parent corporation. A company will be deemed to control a company if it has the power to direct or cause the direction of the management or policies of such company, whether through the ownership of voting securities, by contract, or otherwise. MBA § 1.1. Under this definition, Concentra is an affiliate of FOCUS because FOCUS was a wholly-owned subsidiary of Concentra, controlled by Concentra. Concentra admits it was an affiliate of FOCUS based on this definition. See, e.g., Concentra's Resp., at 12 (referring to “Concentra's former status as an 'affiliate' of FOCUS”). Affiliates of AWCA and FOCUS, including Concentra, are bound by the MBA pursuant to the entire agreement provision. MBA § 9.11. The entire agreement provision provides: The terms and conditions of this Agreement, and any amendment hereto, will be binding on the parties, their successors, assigns or other transferees for the benefit of the other party and its Affiliates and their successors and assigns. MBA § 9.11. The only reasonable interpretation of this clause is that the MBA binds (1) “the parties,” (2) “their successors, assigns or other transferees for the benefit of the other party” and (3) “its [either party's] affiliates and their successors and assigns.” Concentra argues for an alternative interpretation, that the MBA applies only to “[1] the parties [and] [2] their successors, assigns, or other transferees for the benefit of the other party and its [the other party's] Affiliates and their successors and assigns.” Concentra's Resp., at 12. The Court concludes that Concentra's ungrammatical alternative reading of the clause is unreasonable and does not render the clause ambiguous. This conclusion should end the inquiry, because the MBA would have been binding on Concentra at the time of the alleged harm in this case—the failure to adequately enroll medical providers in the Aetna PPO. However, the parties Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 4 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 dispute whether some of the harm alleged by ESIS to be caused by Concentra occurred after Concentra sold FOCUS. The Court therefore briefly addresses the survival clause in the MBA and concludes that the MBA continues to bind Concentra after of the sale of FOCUS. The survival clause states that the MBA is “meant to survive the termination, cancellation, or expiration of this Agreement.” MBA § 9.10. The clause is *5 binding on either party, its successors and assigns for the benefit of [AWCA] and its affiliates or subsidiaries and their successors and assigns. MBA § 9.10. The only reasonable interpretation of this section is that the MBA remains binding after termination of the agreement on (1) “either party,” (2) “its [either party's] successors or assigns for the benefit of [AWCA],” and (3) “its [either party's] affiliates or subsidiaries and their successors and assigns.” Concentra argues that this clause could reasonably be interpreted to apply to “[1] either party [and] [2] its successors and assigns for the benefit of [AWCA] and its [AWCA's] affiliates or subsidiaries and their successors and assigns,” and therefore that the clause would only apply if the Aetna defendants sought to enforce the MBA. Concentra's Resp., at 11. As with the entire agreement clause, the Court rejects Concentra's ungrammatical reading as a reasonable alternative and determines that the language of the survival clause is unambiguously binding on Concentra. Even if Concentra's interpretation that would limit the survival clause to affiliates “seeking the benefit” of the MBA were reasonable, the Court concludes that Concentra is seeking the benefit of the MBA. Clearly, under the terms of the entire agreement provision, Concentra can enforce the MBA as an affiliate of FOCUS. As will be discussed below, Concentra, through its purported-tort claims, is seeking the benefit of the MBA's indemnification clause and other provisions. Thus, the Court concludes that any contract claims asserted by Concentra as an affiliate of FOCUS are governed by the MBA. The Court determines that the mandatory arbitration provision in the MBA applies to any such contractual claims. As discussed below, while the Second Amended Third Party Complaint asserts no contract claims, Concentra can only obtain the relief it seeks from the Aetna defendants through contractual claims based on the MBA. B. Concentra's Tort Claims The Aetna defendants argue that Concentra's tort claims must be dismissed in lieu of arbitration and in the alternative because they fail as a matter of law. The Court agrees and dismisses the tort claims with prejudice in this Court, but without prejudice to Concentra's right to arbitrate all such claims. As explained above, the MBA is binding on Concentra and requires arbitration of any claims “concerning” the MBA. MBA § 5. As will be discussed below, each of the alleged tort claims directly concern the MBA because they are inextricably related to AWCA's contractual duties under that agreement. Furthermore, assuming arguendo that the MBA does not bind Concentra, the claims fail as a matter of law because, outside of the parties' contractual relationship, there is no independent legal duty to support Concentra's claims. 4 4 For purposes of this Memorandum, the Court applies Pennsylvania law. The MBA includes a choice of law provision that provides “[t]his Agreement will be governed by and construed in accordance with applicable Texas law.” MBA § 9.13. However, the Court finds that there is no conflict between Pennsylvania and Texas law presented under the facts of this case. See Aetna Defs.' Mot. to Dismiss, at 12 n.4 (“Whether Pennsylvania or Texas law applies, the result here is the same.”) 1. Negligent Misrepresentation and Negligence *6 The Aetna defendants argue that Concentra's negligent misrepresentation and negligence claims are barred by Pennsylvania's gist of the action doctrine and because Concentra has failed to identify any applicable duty of care, other than that created by the MBA. The Court agrees. Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 5 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 “Under Pennsylvania law, the 'gist of the action' doctrine 'precludes plaintiffs from recasting ordinary breach of contract claims into tort claims.' +” Jones v. ABN Amro Mortg. Grp., Inc., 606 F.3d 119, 123 (3d Cir. 2010) (quoting Erie Ins. Exch. v. Abbott Furnace Co., 972 A.2d 1232, 1238 (Pa. Super. Ct. 2009)). The gist of the action doctrine bars tort claims that (1) arise solely from a contract between the parties, (2) where the duties allegedly breached were “created and grounded in the contract itself,” (3) where “the liability stems from a contract,” and (4) where the tort claim “essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract.” eToll, Inc. v. Elias/ Savion Advertising, Inc., 811 A.2d 10, 19 (Pa. Super. Ct. 2002) (citations and quotations omitted). When “a defendant's alleged failure to perform its duty under the contract is transformed into a claim that this failure amounts to” negligence or fraud, the gist of the action doctrine bars the tort claim. CRS Auto Parts, Inc. v. Nat'l Grange Mut. Ins. Co., 645 F. Supp. 2d 354, 377 (E.D. Pa. 2009). The Court determines that the Second Amended Third Party Complaint alleges tort duties that could only arise out of the MBA. Concentra avers that “the alleged claims being asserted by ESIS against Concentra in the ESIS Case were actually the result of the alleged negligent conduct of [the Aetna defendants] in providing inadequate/insufficient notice to the healthcare providers purportedly in Aetna's Virginia Network....” Compl. ¶ 17. Concentra alleges in its negligent misrepresentation claim that it “reasonably relied on” the Aetna defendants' representations that “providers' claims submitted on behalf of customers of its clients such as ESIS were properly discounted.” Compl. ¶ 32. Concentra's negligence claim is solely an allegation that the Aetna defendants “committed negligence by providing inadequate/ insufficient notice to the health care providers....” Compl. ¶ 35. The only source of the Aetna defendants' alleged duty to notify health care providers, however, is the MBA, and not any aspect of tort law. Thus, Concentra's negligent misrepresentation and negligence claims amount to an attempt to enforce the MBA on behalf of its subsidiary, FOCUS. Concentra identifies no independent duty of care on the part of the Aetna defendants to provide such notice to the healthcare providers other than the MBA. The duty allegedly breached, the duty to adequately provide notice to the healthcare providers in Aetna's Virginia Network, is one that stems solely from the MBA and the success or failure of such a claim is wholly dependent on the scope of the Aetna defendants' contractual duties. 5 Accordingly, Concentra's negligent misrepresentation and negligence claims are barred by the gist of the action doctrine and the Court grants the Aetna defendants' Motion to Dismiss these claims. 6 Alternatively, even if the MBA were not binding on Concentra, the lack of a legal duty of care absent the MBA is fatal to Concentra's negligence and negligent misrepresentation claims. 5 Concentra argues that some of the alleged negligent acts of the Aetna defendants occurred prior to the execution of the MBA and therefore that the MBA cannot apply to its tort claims. See Concentra Surreply, at 4. If so, there is no independent duty of care and all such claims fail. 6 The cases cited by Concentra for the proposition that the gist of the action doctrine does not bar claims asserted by non- parties to a contract are inapposite in this case because Concentra is bound by the MBA as an affiliate of FOCUS and because Concentra is seeking to enforce the provisions of the MBA. See Centimark Corp. v. Pegnato & Pegnato Roof Mgmt., Inc., Civil Action No. 05-708, 2008 WL 1995305, at *13 (W.D. Pa. May 6, 2008) (holding that individual officers of a corporation could not use gist of the action doctrine to bar tort claims in case in which contract did not purport to bind officers); Fleet Nat'l Bank v. Boyle, Civil Action No. 04-1277, 2005 WL 2455673, at *11 (E.D. Pa. Sept. 12, 2005) (concluding that individual defendants could be held liable for perpetration of a fraud scheme in the course of their employment despite contract between plaintiff and their employer). 2. Common Law Indemnification *7 The Aetna defendants argue that Concentra's common law indemnification claim must be dismissed due to the lack of legal relationship between the Aetna defendants and Concentra, outside of the MBA. The Court agrees. Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 6 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 “Indemnity is a common law remedy which shifts the entire loss from one who has been compelled, by reasons of some legal obligation, to pay a judgment occasioned by the initial negligence of another who should bear it.” Kinney- Lindstrom v. Med. Care Availability and Reduction of Error Fund, 73 A.3d 543, 558 (Pa. 2013). “Under Pennsylvania law, indemnity is available only: (1) where there is an express contract to indemnify, or (2) where the party seeking indemnity is vicariously or secondarily liable for the indemnitor's acts.” Allegheny Gen. Hosp. v. Philip Morris Inc., 228 F.3d 429, 448 (3d Cir. 2000) (citations and quotations omitted). Where there is an express contract to indemnify, common law indemnification is not available. Eazor Express, Inc. v. Barkley, 272 A.2d 893, 895 (Pa. 1971) (“[W]here...there is a written contract setting forth the rights and duties of the parties[,]...[t]he contract must then govern.”). Secondary liability is “constructive only, being based on some legal relation between the parties, or arising from some positive rule of common or statutory law or because of a failure to discover or correct a defect or remedy a dangerous condition caused by the act of the one primarily responsible.” Sirianni v. Nugent Bros. Inc., 506 A.2d 868, 871 (Pa. 1986). “Pennsylvania courts have not extended common law indemnification to cases where the third party plaintiff—which stands in neither an employer/employee or principal/agent relationship to the third party defendant—is alleged to have breached a contract it entered with the plaintiff ....” E. Elec. Corp. of N.J. v. Rumsey Elec. Co., Civil Action No. 08-5478, 2010 WL 2788294, at *3 (E.D. Pa. July 14, 2010). In this case, Concentra has not identified any freestanding legal relationship between it and the Aetna defendants that would make the Aetna defendants secondarily liable, other than the MBA. Concentra's Second Amended Third Party Complaint avers that the Aetna defendants have “an obligation, based on common law indemnification, to indemnify Concentra for such losses as Aetna/AWCA were delegated bill review and network access services by Concentra in Virginia.” Compl. ¶ 38. The “delegation” referred to in the Second Amended Third Party Complaint occurred through the MBA between FOCUS and AWCA. Thus, Concentra's common law claim is supplanted by the indemnification provision in the MBA, which the Court has already ruled applies to Concentra's claims. A claim pursuant to the MBA's indemnification provision would, as discussed above, be barred by the MBA's mandatory arbitration provision. Furthermore, there is no principal–agent or employer–employee relationship between Concentra and the Aetna defendants. Assuming arguendo that there was no MBA, there would be no relationship between the parties from which a common law duty to indemnify could arise. For these reasons, the Court grants the Aetna defendants' Motion to Dismiss the common law indemnification claim. 3. Promissory Estoppel The Aetna defendants argue that Concentra's promissory estoppel claims must be dismissed because of the existence of a binding contract between the parties. The Court agrees. *8 The doctrine of promissory estoppel is “invoked in situations where the formal requirements of contract formation have not been satisfied and where justice would be served by enforcing a promise.” Carlson v. Arnot-Ogden Mem'l Hosp., 918 F.2d 411, 416 (3d Cir. 1990) citing Cardmone v. Univ. of Pittsburgh, 384 A.2d 1228, 1233 (Pa. Super. 1978). “Promissory estoppel allows the court to enforce a party's promise that is unsupported by consideration where (1) the promisor makes a promise that he reasonably expects to induce action or forbearance by the promisee, (2) the promise does induce action or forbearance by the promisee, (3) and injustice can only be avoided by enforcing the promise.” Id. If the parties formed an enforceable contract, a promissory estoppel claim is barred. Id. In this case, Concentra alleges that the Aetna's defendants promised Concentra “that they would adequately and properly perform repricing and access to the Aetna Virginia Network for services for Concentra's customers such as ESIS in Virginia.” Compl. ¶ 42. This promise was made in the context of the MBA between FOCUS and AWCA. Thus, there Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 7 of 8 Esis, Inc. v. Coventry Health Care Workers Compensation, Inc., Slip Copy (2016) 2016 WL 928667 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 is a valid contract between Concentra's former subsidiary and the Aetna defendants, and Concentra is bound by the contract as an affiliate of FOCUS. Alternatively, Concentra's Second Amended Third Party Complaint does not allege any promise that the Aetna defendants made to Concentra other than the promise to perform the contractual duties of the MBA and therefore Concentra has failed to allege a prima facie case of promissory estoppel. For these reasons, the Court grants the Aetna defendants' Motion to Dismiss the promissory estoppel claim. 4. Equitable Estoppel In addition, the Court concludes that Concentra's tort claims in this case are barred by the arbitration provision in the MBA under the doctrine of equitable estoppel. A nonsignatory to a contract may be bound by an arbitration clause if the nonsignatory “embraces the agreement and directly benefits from it.” Griswold v. Coventry First LLC, 762 F.3d 264, 272 (3d Cir. 2014). “A nonsignatory can 'embrace' a contract in two ways: (1) by knowingly seeking and obtaining direct benefits from that contract; or (2) by seeking to enforce terms of that contract or asserting claims based on the contracts other provisions.” Id. (citations and quotations omitted). As discussed with respect to each tort claim, Concentra is seeking to bind the Aetna defendants to the promise contained in the MBA: that AWCA would provide FOCUS's customers with access to its PPO network and properly enroll providers in that network. None of Concentra's claims are cognizable in the absence of the AWCA's promise to perform based on the MBA. The Court concludes that Concentra is equitably estopped from avoiding the arbitration provision because Concentra is seeking to enforce the provisions of the MBA against the Aetna defendants. C. Leave to Amend “[I]f a complaint is subject to a Rule 12(b)(6) dismissal, a district court must permit a curative amendment unless such an amendment would be inequitable or futile.” Phillips v. County of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008). The Court may dismiss a claim with prejudice based on “repeated failures to cure the deficiency by amendments previously allowed” or “futility of amendment.” Lorenz v. CSX Corp., 1 F.3d 1406, 1414 (3d Cir. 1993). This is Concentra's third attempt to plead its claims against the Aetna defendants. The Court concludes, for the reasons discussed, that any future amendment would be futile in light of the MBA's mandatory arbitration provision. The Court will therefore dismiss the Second Amended Third Party Complaint with prejudice. V. CONCLUSION *9 For the foregoing reasons, the Court grants the Aetna defendants' Motion to Dismiss Concentra's Second Amended Third Party Complaint and dismisses all of Concentra's claims against the Aetna defendants with prejudice. This dismissal is without prejudice to Concentra's right to proceed against the Aetna defendants in arbitration pursuant to the MBA. An appropriate order follows. All Citations Slip Copy, 2016 WL 928667 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-6 Filed 06/27/17 Page 8 of 8 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2017 WL 1092541 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Linda GLENWRIGHT, Plaintiff v. CARBONDALE NURSING HOME, INC. d/b/a Carbondale Nursing Home and Rehabilitation Center and Genesis Eldercare Network Services, Inc., Defendants CIVIL ACTION NO. 3:16-0926 | Signed 03/23/2017 Attorneys and Law Firms George R. Barron, Wilkes-Barre, PA, for Plaintiff. Karen P. Gaster, Rubin, Fortunato & Harbison PC, Paoli, PA, for Defendants. MEMORANDUM MALACHY E. MANNION, United States District Judge *1 Currently before the court is a motion to dismiss or, in the alternative, compel arbitration, (Doc. 11), filed by the defendants. The defendants' motion was filed in response to the plaintiff's (“Glenwright's”) amended complaint, (Doc. 16). Their motion seeks dismissal of Glenwright's claims or, in the alternative, enforcement of an arbitration agreement between Glenwright and defendant Carbondale Nursing Home, Inc. (“Carbondale”). Based on the foregoing, the defendants' motion is GRANTED IN PART and DENIED IN PART. Glenwright must arbitrate her claims against Carbondale. The claims against defendant Genesis Eldercare Network Services, Inc. (“Genesis”) may proceed and Genesis will be allowed to file a renewed motion at the close of discovery. I. FACTUAL BACKGROUND Glenwright was employed by Carbondale, a healthcare facility, for approximately six (6) years as a registered nurse and supervisor. Genesis is the managing entity of Carbondale. At some point before or during her employment, Glenwright signed an arbitration agreement with Carbondale. (Doc. 24-9). Glenwright does not dispute that she signed this agreement. (Doc. 24, ¶ 3; see also Doc. 24-9, at 3). The agreement provides as follows: [A]ny ... dispute arising out of the [employee's] employment or the termination of ... employment (including, but not limited to claims of unlawful termination based on race, sex, age, national origin, disability, breach of contract or any other bias prohibited by law) [will be submitted] ... exclusively to binding arbitration under the Federal Arbitration Act. (Doc. 24-9, at 1). The agreement also states that the employee's dispute must be initiated by the employee delivering a written request for arbitration within one year from the date of the alleged incident. (Id.). If the employee does not submit a timely request, the agreement states the employee's “right to raise any claims arising out of the [employee's] termination” will have been waived. (Id.). In addition, in two instances, the agreement provides that the employee will be responsible for his or her own legal costs and half the cost of arbitration. (Doc. 24-9, at 2–3). Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 1 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Glenwright's employment was terminated, effective May 20, 2014. Leading up to her termination, on December 10, 2012, Glenwright suffered an injury at work. She filed a workers' compensation claim for this injury in February of 2013 and was unable to work until August of 2013. Glenwright's work injury exacerbated her arthritis and degenerative knee condition. When she returned to work she required accommodations for these disabilities, including adjustments to her duties and work schedule. She was granted her requested accommodations from August of 2013 until her termination. After seeking accommodations, Glenwright alleged that she was assigned to “menial and physically challenging job duties that she had rarely been required to perform in the past.” (Doc. 16, at ¶ 20). She described this as “unwarranted discipline” designed to “force her out of the workplace.” (Id. ¶ 21). *2 On May 14, 2014, Glenwright was informed that her workplace could no longer accommodate her injuries. She was notified that her employment would be terminated, effective May 20, 2014, if she did not apply for a leave of absence. Glenwright notified her workplace, verbally and in writing, that she would not request a leave of absence because she did not need one and requested the continuance of her existing accommodations. No further accommodations were provided. II. PROCEDURAL BACKGROUND On October 9, 2014, Glenwright filed a charge with the Equal Opportunity Employment Commission (“EEOC”) asserting claims under the Americans with Disabilities Act of 1990 (“ADA”), 42 U.S.C. § 12101 et seq. and she dual- filed claims under the Pennsylvania Human Relations Act (“PHRA”), 43 PA. STAT. § 951 et seq. with the Pennsylvania Human Relations Commissions (“PHRC”). (Doc. 24-8). These charges listed Carbondale as the respondent, but did not list Genesis explicitly. On May 18, 2016, Glenwright filed a complaint in this court. (Doc. 1). At that time, Glenwright was still in the process of exhausting her administrative remedies with respect to her ADA and PHRA claims; thus, her complaint did not contain those claims. Within her complaint, Glenwright notified the court that she intended to file an amended complaint once she completed the administrative process. (Doc. 1, at ¶ 2 n. 1). On August 11, 2016, Glenwright filed an unopposed motion to amend/correct her complaint. (Doc. 9). On August 12, 2016, the court granted the motion, (Doc. 10), and the amended complaint was docketed that same day. 1 (Doc. 16). Her amended complaint included claims under Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq. (Counts I–II), claims under the Family Medical Leave Act of 1993, 29 U.S.C. § 2601 et seq. (Counts III–IV), a wrongful discharge claim under Pennsylvania law (Count V), claims under the ADA (Counts VI–VIII), and claims under the PHRA (Counts IX–XI). 1 In addition to adding her claims under the ADA and PHRA, Glenwright's amended complaint also changed the name of one defendant. Her original complaint listed the defendants as Carbondale and an entity named Genesis Healthcare, Inc. (See Doc. 1). The amended complaint kept Carbondale as a defendant and changed Genesis Healthcare, Inc. to Genesis Eldercare Network Services, Inc., the current co-defendant. (See Doc. 16). This change was likely in response to the Rule 7.1 disclosure statement filed by Genesis Healthcare, Inc., (Doc. 6), identifying Genesis Eldercare Network Services, Inc. as the corporate parent of Genesis Healthcare, Incorporated. Carbondale has no corporate parent. (See Doc. 5). On August 16, 2016, the defendants filed the current motion with a supporting brief. (Doc. 11, Doc. 12). In addition, the defendants filed a statement of facts with the underlying arbitration agreement attached as an exhibit. (Doc. 13). The defendants' motion seeks dismissal based on the limitations period provided for in the arbitration agreement. In the alternative, the defendants request that this court compel arbitration. As another alternative argument, the defendants argue that this court lacks subject-matter jurisdiction over the claims against Genesis because Glenwright failed to exhaust her administrative remedies with respect to Genesis. On September 27, 2016, after requesting and receiving two extensions of time, Glenwright filed her brief in opposition, contesting the validity of the agreement, among other arguments. (Doc. 23). She also filed a counter statement of facts with several exhibits attached. (Doc. 24). On October 17, 2016, after requesting and receiving an extension of time, the defendants filed a reply brief. (Doc. 27). Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 2 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 *3 On September 19, 2016, after the defendants' motion had been filed, the court held a telephone case management conference with the parties. (See Doc. 18). Immediately thereafter, the court issued a scheduling order setting various case management deadlines, including a February 13, 2017 deadline for fact discovery. (Doc. 20). No supplemental briefs or exhibits have been provided to the court during the course of this discovery. On February 8, 2017, the plaintiff filed an unopposed motion seeking to extend the original deadlines, which the court granted. (See Docs. 28–29). Thus, to date, the parties are still in the process of discovery. III. LEGAL STANDARDS A. Motion to Compel Arbitration In Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013), the Third Circuit Court of Appeals clarified the appropriate standard to be applied to a motion to compel arbitration that is filed prior to the benefit of discovery. The court held that where the affirmative defense of arbitrability is apparent on the face of the complaint or those documents relied upon in the complaint the standard under Federal Rule of Civil Procedure 12(b)(6) should be applied. Id. at 773–74. In those cases, the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., would favor speedy resolution of the motion without the delay of discovery. Id. at 773. “[A] more deliberate pace is required” when either (1) the complaint and documents referenced therein do not establish with “requisite clarity” that the parties agreed to arbitrate or (2) “the opposing party has come forth with reliable evidence that is more than a ‘naked assertion ... that it did not intend to be bound,’ even though on the face of the pleadings it appears that it did.” Id. at 774 (quoting Somerset Consulting, LLC v. United Capital Lenders, LLC, 832 F. Supp. 2d 474, 479 (E.D. Pa. 2011) and Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd, 636 F.2d 51, 55 (3d Cir. 1980)). In those instances the motion should be resolved according to the standard provided by Federal Rule of Civil Procedure 56. Id. When the issue of arbitrability is not apparent on the face of the complaint, normally, “the motion to compel arbitration must be denied pending further development of the factual record.” Id. “[A] restricted inquiry into the factual issues will be necessary to properly evaluate whether there was a meeting of the minds on the agreement to arbitrate, and the non- movant must be given the opportunity to conduct limited discovery.” Id. (internal citations and quotations omitted). After this, the appropriate standard to be applied is the standard provided by Rule 56. Here, the issue of arbitrability is not apparent on the face of Glenwright's amended complaint or any documents cited within or attached to the amended complaint. The defendants' arguments are entirely premised on the arbitration agreement attached to the motion to compel arbitration. Glenwright contests the validity of this agreement. Normally, a plaintiff would be “entitled to discovery on the question of arbitrability before [this] court entertains further briefing” on the issue. Guidotti, 716 F.3d at 776 (quoting Somerset, 832 F. Supp. 2d at 482). However, at this stage of the litigation, the parties have already engaged in several months of discovery. Despite this, Glenwright has not submitted or attempted to submit any supplemental briefing or exhibits to further her arguments with respect to the issue of arbitrability. Denying the defendants' motion in its entirety at this time solely to provide additional time for discovery would be inefficient, especially where the allowance of discovery to engage in the arbitrability analysis is, typically, quite limited. *4 Further, on February 8, 2017, Glenwright requested more time for discovery generally. (Doc. 28). The court granted her request. (Doc. 29). The court will not further extend the discovery deadline. Instead, the court will rule on the defendants' motion using the summary judgment standard set forth in Federal Rule of Civil Procedure 56 in light of the briefing, exhibits, and statements of facts submitted by all parties. B. Rule 56 Summary Judgment Standard Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 3 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Rule 56 allows a court to enter summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317 (1986). A factual dispute is genuine if a reasonable jury could find for the nonmovant, and is material if it will affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Aetna Cas. & Sur. Co. v. Ericksen, 903 F. Supp. 836, 838 (M.D. Pa. 1995). In support of their argument, the movant and nonmovant must point to “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials” or show that the other party's evidence does “not establish the absence or presence of a genuine dispute.” FED. R. CIV. P. 56(c)(1)(A), (B). The movant can also meet the Rule 56 standard by showing that “on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the nonmoving party.” In re Bressman, 327 F.3d 229, 238 (3d Cir. 2003). The nonmoving party must then “do more than simply show that there is some metaphysical doubt as to material facts.” Boyle v. Cnty. of Allegheny, 139 F.3d 386, 393 (3d Cir. 1998) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). In assessing the parties' arguments, “the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.” Guidotti, 716 F.3d at 772 (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)). C. Administration Exhaustion—Rule 12(b)(1) In addition to seeking dismissal or arbitration based on the arbitration agreement, the defendants' motion challenges this court's subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The defendants allege that Glenwright failed to exhaust her administrative remedies with respect to Genesis. “A motion to dismiss under Rule 12(b) (1) challenges the jurisdiction of the court to address the merits of the plaintiff's complaint.” Vieth v. Pennsylvania, 188 F. Supp. 2d 532, 537 (M.D. Pa. 2002). The failure to exhaust administrative remedies is a jurisdictional issue and the appropriate device to raise this issue is a motion to dismiss under Rule 12(b)(1). See Batchelor v. Rose Tree Media Sch. Dist., 759 F.3d 266, 271 (3d Cir. 2014). A Rule 12(b)(1) dismissal is not a judgment on the merits, but only a determination that the court lacks the authority to hear the case. Swope v. Central York Sch. Dist., 796 F. Supp. 2d 592, 599 (M.D. Pa. 2011). Because the district court is a court of limited jurisdiction, the burden of establishing jurisdiction always rests upon the party asserting it. See Kokkonen v. Guardian Life. Ins. Co. of America, 511 U.S. 375, 377 (1994). *5 An attack on the court's jurisdiction may be either “facial” or “factual” and the “distinction determines how the pleading must be reviewed.” Constitution Party of Pennsylvania v. Aichele, 757 F.3d 347, 357 (3d Cir. 2014). A facial attack tests the sufficiency of the pleadings, while a factual attack challenges whether a plaintiff's claims fail to comport factually with jurisdictional prerequisites. Id. at 358; see also S.D. v. Haddon Heights Bd. of Educ., 833 F.3d 389, 394 n. 5 (3d Cir. 2016). If the defendant brings a factual attack, the district court may look outside the pleadings to ascertain facts needed to determine whether jurisdiction exists. Id. Reviewing a facial attack, a district court must accept the allegations stated in a plaintiff's complaint and review “only whether the allegations on the face of the complaint, taken as true, allege facts sufficient to invoke the jurisdiction of the district court.” Taliaferro v. Darby Twp. Zoning Bd., 458 F.3d 181, 188 (3d Cir. 2006) (internal quotation marks omitted). “Thus, a facial attack calls for a district court to apply the same standard of review it would use in considering a motion to dismiss under Rule 12(b)(6), i.e., construing the alleged facts in favor of the nonmoving party. This is in marked contrast to the standard of review applicable to a factual attack, in which a court may weigh and ‘consider evidence outside the pleadings.’ ” Aichele, 757 F.3d at 358 (quoting Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000)) (internal citation omitted). The court construes the defendants' motion as a factual attack of jurisdiction. An attack on jurisdiction based on a failure to exhaust remedies that is filed prior to answering the complaint is usually, “by definition, a facial attack” on the pleadings unless the defendant has offered factual averments in support of its motion. Haddon Heights, 833 F.3d Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 4 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 at 394 n. 5. Here, all parties have provided statements of facts inclusive of various factual averments. In addition, all parties have provided the court with an abundance of exhibits to support their arguments. The court will look to these exhibits in making its determination. IV. THE ARBITRATION DISPUTE The parties dispute the validity of the arbitration agreement signed by Glenwright. In particular, Glenwright argues that the agreement is unconscionable under Pennsylvania law and that Carbondale waived its rights under the agreement. Also at issue is whether Genesis may compel arbitration, assuming the agreement is valid. The court finds that the arbitration agreement is valid when the fee provisions have been severed from the agreement. The court also finds that the decision of whether Carbondale has waived the provision in the agreement requiring a written request for arbitration within one year of her termination is a question for the arbitrator and not this court. Finally, the court cannot determine at this stage whether Genesis should be deemed a party to the agreement as noted below and will allow Genesis to file a renewed motion, if appropriate, after the completion of discovery. “A party to a valid and enforceable arbitration agreement is entitled to a stay of federal court proceedings pending arbitration as well as an order compelling such arbitration.” Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 263–64 (3d Cir. 2003); see also 9 U.S.C. §§ 3, 4. Judicial review over a dispute regarding arbitration is, initially, limited to a two- part inquiry. CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 172 (3d Cir. 2014). First, the court must determine whether “a valid agreement to arbitrate exists,” and, second, whether “the particular dispute falls within the scope of the agreement.” Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009); see also id. Here, the parties primary dispute falls within the first inquiry. Glenwright does not dispute that her employment related claims are included in the scope of the arbitration agreement. *6 The initial question of whether the parties validly agreed to arbitrate is presumed to be a question for the court unless the parties clearly and unmistakably indicate otherwise. Guidotti, 716 F.3d at 773. Generally, there is a “liberal federal policy favoring arbitration” and a “fundamental principle that arbitration is a matter of contract.” AT&T Mobility, 131 S. Ct. at 1745 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) andRent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010)). However, “before a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be express, unequivocal agreement to that effect.” Guidotti, 716 F.3d at 773 (quoting Par-Knit Mills, 636 F.2d at 54). Thus, the presumption in favor of arbitration is only applied once the court has determined that the parties “have consented to and are bound by the arbitration [agreement].” Griswold v. Coventry First LLC, 762 F.3d 264, 271 (3d Cir. 2014). Their agreement may be declared unenforceable by the court “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2; see also AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740,1746 (2011). A. Unconscionability Glenwright argues that the arbitration agreement is invalid because it is unconscionable, particularly because it requires the employee to bear his or her own legal fees and costs and half the cost of arbitration. 2 The arbitration agreement states that Carbondale and the employee “shall each bear respective costs for legal representation at any such arbitration.” (Doc. 24-9, at 2). It further states, “The parties, if any, shall share the cost of the arbitrator and court reporter, equally.” (Id.). Later, in the Acknowledgment signed by Glenwright, the agreement again states, “I agree that I will be entitled to legal representation at my own cost, during arbitration.” (Id. at 3). The defendants argue that the agreement is not unconscionable under Pennsylvania law and, in the alternative, that the fee provisions can be severed. The court finds that the fee provisions are unconscionable, but that this does not render the entire agreement unconscionable. The unconscionable provision can be severed to save the parties' agreement to arbitrate. Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 5 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 2 Glenwright has not argued, nor has she presented any evidence to show, that the fee provisions are prohibitive of her ability to “fully and effectively” vindicate her rights. See Spinetti v. Serv. Corp. Int'l, 324 F.3d 212, 214 (3d Cir. 2003). A litigant arguing the inability to vindicate his or her rights based on a fee provision in the agreement bears the burden of showing the likelihood of high costs and must establish, beyond speculation, the existence of and inability to pay these costs. See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91–92 (2000); Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 268–69 (3d Cir. 2003); Spinetti, 324 F.3d at 216–17. Here, Glenwright argues that the fee provisions are unconscionable based on the possible limitation of remedies available to her and, thus, the agreement as a whole is unconscionable and cannot be enforced. A court should “generally apply state contract principles to determine whether an arbitration agreement is unconscionable.” Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 230 (3d Cir. 2012). In Pennsylvania, an agreement is unconscionable if it is both substantively and procedurally unconscionable. Id. (citing Salley v. Option One Mortg. Corp., 925 A.2d 115, 119 (2007)). Glenwright's argument for unconscionability of the contract is based on the alleged unconscionability of the fee provisions in the agreement. The court agrees that the provisions are unconscionable, but disagrees that this renders the entire contract unconscionable and, therefore, unenforceable. *7 “Provisions requiring parties to be responsible for their own expenses, including attorneys' fees, are generally unconscionable because restrictions on attorneys' fees conflict with federal statutes providing fee-shifting as a remedy.” Id. at 230–231(collecting cases). This generalization is only applicable when the provision requires the litigant to bear legal fees and costs regardless of the outcome of the arbitration and disallows fee-shifting. See id. at 231; Alexander v. Anthony Int'l, L.P., 341 F.3d 256, (3d Cir. 2003) (fee provision substantively unconscionable under Virgin Islands law where the agreement substantially limited the available remedies to plaintiffs); Spinetti, 324 F.3d at 214–15 (addressing a provision that required the litigant to bear costs regardless of the outcome of arbitration). If the agreement is ambiguous with respect to the arbitrator's ability to fashion an appropriate award, this ambiguity must be addressed by the arbitrator in the first instance. See Quillion, 673 F.3d at 231. In Quillion, the Third Circuit found an ambiguity with respect to the employee's ability to obtain fees as a remedy where explicit provisions in the parties' agreement contradicted each other as to the availability or non availability of fees and costs. Id. Here, the arbitration agreement at issue unambiguously provides that the employee will bear his or her own legal costs and half of the costs of arbitration. It states so in two instances. Unlike the agreement in Quillion, there is no provision that states that all remedies available in a court of law would be available to Glenwright in arbitration, or some similar provision to that effect. Thus, there is no ambiguity in the language of the agreement and it is clear that Glenwright must bear her respective legal fees and half the costs of arbitration. This is so despite the existence of a fee-shifting remedy available to her in this court. This is clearly unconscionable underQuillion. See 673 F.3d at 230–31. Although the court finds that the fee provisions are unconscionable, the court also finds that these provisions are severable. In Pennsylvania, where an essential term in a contract is illegal, the entire contract is unenforceable. Spinetti, 324 F.3d at 214 (citing Deibler v. Chas. H. Elliott Co., 81 A.2d 557, 560–61 (Pa. 1951)). In Spinetti v. Service Corporation International, the Third Circuit, applying Pennsylvania law, explained that a clause can be stricken from an agreement so long as it does not constitute “an essential part of the agreed upon exchange.” Id. (quoting RESTATEMENT (SECOND) OF CONTRACTSS § 184(1) (1981)). This is true even if there is no specific clause in the agreement allowing for severance of the agreement. Id. at 221–22. The Spinetti court affirmed the district court's decision to sever unenforceable fee provisions in an employment arbitration agreement. Id. The court found that the essence of the agreement was to settle employment disputes, and not the language regarding fees. Id. at 214. “[P]rovisions regarding payment of arbitration costs and attorney's fees represent only a part ‘of [the] agreement and can be severed without disturbing the primary intent of the parties to arbitrate their disputes.’ ” Id. (quoting the district court) (alteration in original). In line with Spinetti, the court is able to sever the fee provisions in the parties' arbitration agreement without disturbing the intent of the parties to arbitrate their employment-related disputes. Thus, any argument that the unconscionable fee provision renders the entire agreement unconscionable is legally unsound. The court will enforce the agreement without the fee provisions and allow the parties to arbitrate their claims. Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 6 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Moreover, Glenwright has not argued, nor has she shown, that the agreement is procedurally unconscionable, which this court would be required to find in order to deem the entire agreement unconscionable. “A contract is procedurally unconscionable where ‘there is a lack of meaningful choice in the acceptance of the challenged provision[.]’ ” Quillion, 673 F.3d at 235 (quoting Salley, 925 A.2d at 119) (alteration in original). “Under Pennsylvania law, a contract is generally considered to be procedurally unconscionable if it is a contract of adhesion.” Id. However, more than a mere disparity of bargaining power is needed to find procedural unconscionability. Id. The court should consider factors including: “the take-it-or-leave-it nature of the standardized form of the document[,] the parties' relative bargaining positions, and the degree of economic compulsion motivating the adhering party[.]” Id. at 235–36 (quoting Salley, 925 A.2d at 125) (alteration in original) (internal quotation marks omitted). *8 Glenwright has not offered any arguments indicating that the arbitration agreement as a whole is procedurally unconscionable. Accordingly, the court finds that the agreement as a whole is valid, but will sever the unconscionable fee provisions. B. Waiver Having found a valid arbitration agreement between Carbondale and Glenwright, the court must next determine whether the agreement has been waived, and, if not, whether the case must be dismissed because Glenwright failed to follow the procedural requirements in the agreement. Glenwright argues that Carbondale “waived its rights under [the] policy,” including the one year limitations period, because Carbondale did not notify her of the arbitration agreement at any time during the underlying administrative proceedings. (Doc. 23, at 7). The court finds that whether Carbondale waived the clause requiring written notification of the dispute within a year is an issue for the arbitrator to decide, not this court. Accordingly, the court will compel arbitration with respect to Carbondale and allow the arbitrator to determine whether or not Glenwright's claims fail because she did not submit a written request for arbitration in time. “[W]aiver of the right to arbitrate based on litigation conduct remains presumptively an issue for the court to decide.” Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 219 (3d Cir. 2007). “Consistent with the strong preference for arbitration in federal courts, waiver [of the right to compel arbitration] is not to be lightly inferred, and waiver will normally be found only where the demand for arbitration came long after the suit commenced and when both parties had engaged in extensive discovery.” Nino, 609 F.3d at 208 (quoting PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068–69 (3d Cir. 1995)). “[H]owever, a court may refuse to enforce an arbitration agreement where, for example, the alleged defaulting party has acted inconsistently with the right to arbitrate, and [the court] will not hesitate to hold that the right to arbitrate has been waived where a sufficient showing of prejudice has been made by the party seeking to avoid arbitration.” Id. (internal quotation marks and citations omitted). The list of factors relevant to this inquiry include the following: [1] the timeliness or lack therof of a motion to arbitrate ... [; 2] the degree to which the party seeking to compel arbitration has contested the merits of its opponent's claims; [3] whether that party has informed its adversary of the intention to seek arbitration even if it has not yet filed a motion to stay the district court proceedings; [4] the extent of its non-merits motion practice; [5] its assent to the court's pretrial orders; and [6] the extent to which both parties have engaged in discovery. Id. at 208–209 (quoting Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 912, 926–27 (3d Cir. 1992)) (internal citations omitted) (alterations in original). All of the above factors need not be present and the existence of prejudice is the “touchstone for determining whether the right to arbitrate has been waived by litigation conduct.” Id. at 209 (quoting Ehleiter, 482 F.3d at 219). Here, Glenwright's sole argument for waiver is premised on the defendants' failure to raise the arbitration agreement during the underlying administrative proceedings. She does not address any litigation conduct in this court as a basis for her waiver argument. The Third Circuit has not directly addressed whether a failure to raise the issue of arbitration Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 7 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 in administrative proceedings constitutes a waiver. The Third Circuit has recognized that a defendant is not required to raise every legal defense or argument before the EEOC.Petruska v. Gannon Univ., 462 F.3d 294, 308 (3d Cir. 2006) (citing Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 15 (1st Cir. 2005) (holding that appellee did not waive right to raise arbitration defense in district court by failing to raise it before EEOC)). Several federal courts addressing this issue have come to the conclusion that failure to raise the arbitration agreement in administrative proceedings does not constitute a waiver of the right to compel arbitration. See, e.g., Volpe v. Jetro Holdings, No. 08-3521, 2008 WL 4916027, at *6–7 (E.D. Pa. Nov. 14, 2008) (collecting cases); see also Esaka v. Nanticoke Health Servs., Inc., 752 F. Supp. 2d 476, 484 (D. Del. 2010). The court is persuaded by the reasoning in these cases and sees no reason to come to a different conclusion. *9 Further, in light of the factors provided for waiver, generally, the court cannot conclude that Glenwright will be prejudiced by Carbondale's failure to raise the arbitration issue. The only argument that Glenwright can assert to show possible prejudice is the requirement requiring employees to submit their written request for arbitration within one year from the date of termination or alleged incident in dispute. (Doc. 24-9, at 1). The court is not able to conclude that this procedural requirement has been waived and will leave that issue for the arbitrator. “ ‘[P]rocedural questions which grow out of the dispute and bear on its final disposition’ are presumptively not for the judge, but for an arbitrator, to decide.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)) (emphasis in original). Thus, “waiver, delay, or like defenses arising from non-compliance with contractual conditions precedent to arbitration” are presumptively for the arbitrator. Ehleiter, 482 F.2d at 219. In comparison, waiver based on active litigation in court implicates the “court's authority to control judicial procedures and to resolve issues ... arising from judicial conduct” and is, presumptively, an issue for the court. Id. (emphasis in original). The Third Circuit's reasoning in Ehleiter further supports a finding that conduct in the administrative proceeding is not sufficient to find waiver of the right to compel arbitration in this judicial proceeding. It also leads to the conclusion that the waivability of a particular clause requiring a written request for arbitration within a period of time is an issue for the arbitrator to decide and not this court. Accordingly, the court will compel arbitration and enforce Carbondale's agreement with Glenwright to arbitrate all employment related disputes, absent the severed fee provisions. It is for the arbitrator to determine whether Carbondale waived the written notification requirement in the parties' agreement. C. Genesis The court must next determine if Genesis is covered by the arbitration agreement. While it is clear that Carbondale is a party to the agreement, the parties dispute whether Genesis is a party. (See Doc. 23, at 3 n. 1). Genesis is not a signatory to the agreement. (See Doc. 24-9 (referencing Carbondale only)). In a footnote, Glenwright asserts that Genesis cannot rely on the agreement because Genesis is not a signatory. (Id.). Also in a footnote, the defendants appear to assert that they should be treated as one and the same for purposes of arbitration due to Glenwright's own arguments as provided in her brief; overall, their argument is unclear. (Doc. 27, at 8 n.3). At this stage, a genuine dispute still exists as to whether Genesis and Glenwright agreed to arbitrate claims and whether Genesis may compel Glenwright to arbitrate. “[A] court may only compel a party to arbitrate where that party has entered into a written agreement to arbitrate that covers that dispute.” DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 194 (3d Cir. 2001) (quoting Bel-Ray Co., Inc. v. Chemrite (Pty) Ltd., 181 F.3d 435, 444 (3d Cir. 1999)). “[W]hen asked to enforce an arbitration agreement against a non-signatory to an arbitration clause, [the court] ask[s] ‘whether he or she is bound by that agreement under traditional principles of contract and agency law.’ ” Id. at 194–95 (quoting Bel-Ray Co., 181 F.3d at 444). These principles may include “assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver [,] and estoppel.” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009). First, however, a court must look to state law to determine if the particular principle being argued is recognized and thereafter apply it to the parties dispute. Id. at 632; Flintkote Co. v. Aviva PLC, 769 F.3d 215, 220 (3d Cir. 2014). Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 8 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 *10 Pennsylvania law allows nonsignatories to be bound to an arbitration agreement. Griswold, 762 F.3d at 271–72 (citing Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa. Super. Ct. 2006)). Particularly, Pennsylvania recognizes the agency/principle theory of binding nonsignatories to an agreement. Provensano v. Ohio Valley Generally Hosp., 121 A.3d 1085, 1097 (Pa. Super. Ct. 2015) ( “[I]f the principle is bound by an arbitration agreement, its agents, employees and representatives are generally likewise bound and can enforce the arbitration agreement, even as non-signatories to the agreement.”) (collecting cases); see also Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1122 (3d Cir. 1993) (“Where the parties to [an arbitration] clause unmistakably intend to arbitrate all controversies which might arise between them, their agreement should be applied to claims against agents or entities related to the signatories.”). The agency relationship may be created by estoppel, among other traditional ways of establishing the relationship. See Walton v. Johnson, 66 A.3d 782, 786, 788 (Pa. Super. Ct. 2013). The Third Circuit has also interpreted Pennsylvania law to allow nonsignatories to be bound by equitable estoppel, a separate but related concept to agency by estoppel. See Griswold, 762 F.3d at 271–73. In addition, a nonsignatory may be bound under the third-party beneficiary doctrine in Pennsylvania. See Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1271 (Pa. Super. Ct. 2004). Here, the defendants have not made clear how Genesis, a nonsignatory, may bind Glenwright, a signatory, to the arbitration agreement. The entirety of the defendants' argument is located in a footnote. (Doc. 27, at 8 n. 3). The footnote references the doctrines of agency and estoppel. However, later in their briefing, the defendants assert that they should be treated separately for purposes of administrative exhaustion. (See Doc. 12, at 14–15; id.). The defendants' argument for administrative exhaustion purposes is inconsistent with their argument that Genesis is Carbondale's “agent.” With respect to estoppel, the defendants cite to a non-precendential, state trial court decision applying the principle of equitable estoppel, specifically. (Doc. 27, at 8 n. 3) (citing Barletto v. Heuschel, 21 Pa. D. & C. 5th 376, 402–403 (Ct. Com. Pl. 2011)). It is not clear that equitable estoppel is applicable here. In the context of a nonsignatory attempting to bind a signatory to an arbitration agreement, equitable estoppel applies only where “the claims [against the nonsignatory] were intimately founded in and intertwined with the underlying contractual obligations” that contain the arbitration clause. Griswold, 762 F.3d at 272. The signatory cannot rely on contract obligations for their claims against the true signatory but then refuse to arbitrate against the nonsignatory based on those same claims. The Third Circuit has described this as the nonsignatory “voluntarily pierc[ing] its own veil” to compel arbitration. E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 201 (3d Cir. 2001). This principle is applied where there is some underlying agreement forming the basis of the plaintiff's claims. Glenwright's claims are not based on the agreement at issue, but are based on violations of federal and state statutory law. The defendants have not shown that equitable estoppel would be appropriate in this context. More importantly, the parties have not clarified the exact relationship between Genesis and Carbondale. Glenwright describes Genesis as the managing entity for Carbondale. (Doc. 16, ¶ 8). Genesis concedes this is true, though the defendants dispute whether Genesis was Glenwright's “employer.” (See Doc. 13, ¶ 2; Doc. 24, ¶ 2). It appears from the record that Genesis and Carbondale are, in fact, separate entities. Carbondale and Genesis's subsidiary, an initial defendant in this action, filed a separate Rule 7.1 disclosure statement. (Doc. 5, Doc. 6). Carbondale has no parent corporation, though it is unclear if Genesis and Carbondale are affiliated entities in any way. (See Doc. 5). At this stage it is not clear if Genesis can be deemed an agent of Carbondale and, thus, may compel arbitration against Glenwright. It is not even clear if this is the defendants' argument. *11 The defendants have not shown “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law” with respect to Genesis' ability to compel arbitration. FED. R. CIV. P. 56(a). Nor is the court persuaded that “no reasonable jury” could find that Glenwright did not agree to arbitrate with Genesis. In re Bressman, 327 F.3d at 238. The parties have not provided the court with enough facts to make this determination and the court is unable to rely on the parties' footnotes. 3 At this stage, the court will deny the motion with respect to Genesis Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 9 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 without prejudice and allow Genesis to file a renewed motion after the completion of fact discovery, if appropriate. At that time, hopefully, the court would be able to properly address the parties true arguments. 3 Arguments raised in passing that are not squarely argued are, typically, deemed waived. See Johnson v. Metlife Bank, N.A., 883 F. Supp. 2d 542, 550 n.4 (E.D. Pa. 2012) (citing John Wyeth & Brother, Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070, 1076 n. 6 (3d Cir. 1997)). In this instance, the parties have failed to properly address this issue and rely solely on sparse arguments in footnotes. This renders the court unable to “make an informed ruling” on the issue. Id. V. ADMINISTRATIVE EXHAUSTION Next, the defendants argue that this court lacks jurisdiction over the ADA and PHRA claims against Genesis because Glenwright failed to name Genesis as a party in the underlying administrative proceedings before the EEOC and PHRC. Glenwright argues that Genesis did not need to be named because both entities represented to her that “for all intents and purposes, [they were] one entity.” (Doc. 23, at 9). She also argues that they were “joint employers.” (Id.). The court cannot determine at this stage whether the administrative charge naming Carbondale as respondent is sufficient with respect to Genesis because the parties have not clarified the relationship between Genesis and Carbondale. The defendants' motion will be denied without prejudice at this stage of the litigation. A plaintiff alleging claims under the ADA and PHRA must exhaust his or her administrative remedies before filing a complaint in court.Churchill v. Star Enters., 189 F.3d 184, 190 (3d Cir. 1999). Typically, the plaintiff may only bring suit against the named party in the administrative proceeding. Schafer v. Bd. of Pub. Educ. Of Sch. Dist., 903 F.2d 243, 251 (3d Cir. 1990). An exception exists, however, when the unnamed party received notice and has a “shared commonality of interest with the named party.” Id. at 252 (citing Glus v. G.C. Murphy Co., 629 F.2d 248, 251 (3d Cir. 1980), vacated on other grounds by 451 U.S. 935 (1981)). 4 The court must consider following four factors in making this determination: 1) Whether the role of the unnamed party could through reasonable effort by the complainant be ascertained at the time of the filing of the EEOC complaint; 2) Whether, under the circumstances, the interests of the named party are so similar to the unnamed party that for purposes of obtaining voluntary conciliation and compliance it would be unnecessary to include the unnamed party in the EEOC proceedings; 3) Whether the unnamed party's absence from the EEOC proceedings resulted in actual prejudice to the interests of the unnamed party; and 4) Whether the unnamed party has in some way represented to the complainant that its relationship with the complainant is to be through the named party. Id. at 252 n. 7. This is not a mechanical test and no one factor is dispositive. Glus, 629 F.2d at 251. 4 This articulation has been described as “a shorthand version of the four-part test stated in Glus.” Dixon v. Phila. Housing Auth., 43 F. Supp. 2d 543, 546 (E.D. Pa. 1999). *12 It is unclear at this stage what the relationship is between Carbondale and Genesis other than Genesis being a “managing entity.” Glenwright has provided the court with various exhibits to show that Carbondale and Genesis represented to her that “for all intents and purposes, [they were] one entity” but this alone is insufficient. (Doc. 23, at 9). Further, if Genesis is a party to the arbitration agreement, the exhaustion argument may become moot. Glenwright's exhibits include the following: 1) An employee handbook provided to Glenwright that is labeled “Genesis Employee Handbook for Managed Centers,” (Doc. 24-1); Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 10 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 2) Paystubs listing “Genesis Healthcare” as the payor, (Doc. 24-2); 3) Performance appraisals labeled “Genesis Healthcare Corporation Non-Management Performance Appraisal,” (Doc. 24-3); 4) A leave of absence form provided by “Genesis Healthcare,” (Doc. 24-4); and 5) The position statement offered by Carbondale in the underlying EEOC proceeding whereby Carbondale stated that “Genesis Healthcare, the managing entity of [Carbondale], offered Nurse Glenwright a leave of absence so she could maintain employment,” (Doc. 24-5, at 7). Glenwright uses the above information to argue that there is sufficient commonality of interests between Carbondale and Genesis based on their representations to her. This is not enough to clarify the true relationship between Genesis and Carbondale and it is not enough for this court to decide the defendants' motion using the factors enumerated in Schafer and Glus. The court cannot weigh the first factor at this stage. Glenwright's administrative charge does not mention Genesis, even in passing. Genesis' direct role in the firing is not clear from the charge alone. However, depending on the relationship between Genesis and Carbondale and each entities' role with respect to employee matters, Genesis may have been able to easily ascertain it was included as a party in the administrative charge. Similarly, the court cannot weigh the second factor at this stage. The claims against the parties are identical and their alleged role in the underlying events that took place are intertwined. However, at some point, in order to hold Genesis liable, a legal determination must be made that Genesis was either an agent of Carbondale, part of an integrated enterprise, or a joint employer. 5 Although Genesis did play a role in the underlying allegations as the managing entity for Carbondale, the court cannot state that the parties share a commonality of interest in this action until the exact relationship between the defendants is determined. 5 See N.L.R.B. v. Browning-Ferris Indus. of Pa., Inc., 691 F.2d 1117, 1122 (3d Cir. 1982) (distinguishing the “single employer” and “joint employer” concepts); see also 42 U.S.C. § 12111(5)(A) (defining the term “employer” to include any “agent” of the employer). The third and fourth factors do weigh in favor of Glenwright at this stage. Genesis has not alleged any prejudice based on Glenwright's failure to name the entity in the administrative charge. In addition, based on her exhibits it appears that Glenwright viewed Carbondale and Genesis as one and the same. This conclusion may have been reasonable based on the representations made to her during her employment. Genesis was named as the entity on Glenwright's employee handbook; Genesis was named as the payor on her paystubs; and Genesis was named in her performance appraisals. By listing itself as an entity on various employee documents, Genesis was representing to Glenwright that its relationship with her would be through Carbondale. Schafer, 903 F.2d at 252 n. 7. *13 Although the third and fourth factor weigh in favor of Glenwright, the court finds it necessary to determine the exact relationship between the parties before making a finding on the defendants' administrative exhaustion argument. Clarity regarding the relationship of the parties would also resolve the pending arbitration issue with respect to Genesis and may make the administrative exhaustion argument moot. Though normally the jurisdictional determination is given initial consideration, a few courts have held that a valid arbitration agreement may waive the administrative exhaustion requirement. See, e.g., Virk v. Maple-Gate Anesthesiologists, P.C., 80 F. Supp. 3d 469, 478–80 (W.D.N.Y. 2015), affirmed and vacated in part by 657 Fed.Appx. 19 (2d Cir. 2016) (collecting and analyzing cases). This would be for an issue for the arbitrator to decide, but it would make the current jurisdictional issue moot. Virk, 657 Fed.Appx. at 23. Accordingly, the defendants' motion to dismiss based on lack of subject-matter jurisdiction will be denied at this time to allow further Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 11 of 12 Glenwright v. Carbondale Nursing Home, Inc., Slip Copy (2017) 2017 WL 1092541 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 factual development. The administrative exhaustion issue will be determined after the court's finding regarding Genesis' ability to compel arbitration as a nonsignatory to the arbitration agreement. VI. CONCLUSION The defendants' motion, (Doc. 11), is GRANTED IN PART and DENIED IN PART. The defendants' motion is GRANTED IN PART with respect to Carbondale. The claims against Carbondale will not be dismissed. Instead, Glenwright will be compelled to arbitrate her claims against Carbondale. The court will sever the fee provisions in the parties' agreement as these provisions are unenforceable. The defendants' motion is DENIED WITHOUT PREJUDICE with respect to Genesis. Genesis may file a renewed motion, if appropriate and made in good faith, after the completion of fact discovery. A separate order shall follow. All Citations Slip Copy, 2017 WL 1092541 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-7 Filed 06/27/17 Page 12 of 12 Pesotine v. Liberty Mut. Group, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 4215535 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Disagreed With by Landau v. Viridian Energy PA LLC, E.D.Pa., November 30, 2016 2014 WL 4215535 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Christopher PESOTINE, et al., Plaintiffs, v. LIBERTY MUTUAL GROUP, INC, et al., Defendants. No. 3:14–CV–784. | Signed Aug. 25, 2014. Attorneys and Law Firms Frank J. Santomauro, Scranton, PA, for Plaintiffs. John C. Sullivan, Stacey Z. Jumper, Post & Schell, P.C., Philadelphia, PA, for Defendants. MEMORANDUM OPINION ROBERT D. MARIANI, District Judge. I. Procedural History *1 On March 7, 2014, Plaintiffs, Christopher Pesotine and Colleen Pesotine, filed a Complaint in the above-captioned matter in the Court of Common Pleas of Luzerne County, alleging Breach of Contract (Count I), Bad Faith, 42 Pa. Cons.Stat. Ann. § 8371 (Count II), and Violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons.Stat. §§ 201–1, et seq. (Count III). (Compl., Doc. 1, Ex. A–1). Defendants, Liberty Mutual Group, Inc., and The First Liberty Insurance Corporation, thereafter removed this action to federal court. (Doc. 1). On April 30, 2014, Defendants filed a motion to dismiss defendant Liberty Mutual Group and Count III of the Complaint. (Doc. 3). Upon Defendants' request, the Court held oral argument on Defendants' motion, at which time it denied the motion to dismiss Liberty Mutual Group as a party but reserved ruling on Defendants' motion to dismiss Count III of the Complaint. (Unoff. Tr., at 15–16). For the reasons set forth below, the Court will now grant Defendants' motion with respect to Count III. II. Factual Allegations Plaintiffs' lengthy Complaint alleges the following pertinent facts. On October 28, 2008, Defendants issued an insurance policy to Plaintiffs, providing the Pesotines with homeowners' insurance coverage from November 30, 2008 through November 30, 2009. (Compl., ¶¶ 9–10). The insurance policy provided coverage for Plaintiffs' residence, including “their home, as a dwelling with expanded replacement cost”; “other Case 4:16-cv-01347-MWB Document 74-8 Filed 06/27/17 Page 1 of 5 Pesotine v. Liberty Mut. Group, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 4215535 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 structures on the residence premises”; “personal property with replacement cost”; loss of use of residence premises”; “increased limits and additional coverages”; “an ‘Inflation Protection’ ”; and “ ‘loss of use’, debris removal', and additional coverages' ” under the “Special Provisions—Pennsylvania” section. (Id. at ¶ 13). On January 23, 2009, a fuel valve broke off from under the fuel tank at the plaintiffs' residence, resulting in “fuel extensively leaking and the home being inundated with heavy fuel fumes.” (Id . at ¶ 15). That evening, Plaintiffs (1) contacted Liberty Mutual, “providing notice of loss and damage in accordance with the terms and requirements” of the policy, in response to which Defendants “assured them that their claim would be handled in a timely manner” and (2) subsequently contacted a contractor to “mitigate the fuel leak and attempt to limit the odors.” (Id. at ¶¶ 16, 18). On January 26, 2009, after having no further contact with Defendants, Plaintiffs contacted Liberty Mutual again. (Compl., ¶ 19). The following day, Plaintiffs were contacted by Lisa Speropolous, an Environmental Claims Specialist for Liberty Mutual, who forwarded Plaintiffs an acknowledgment of their claim notification; Defendants also forwarded correspondence to Plaintiffs “which highlighted the ‘many benefits and services' of Plaintiffs' homeowners policy. (Id. at ¶ 21–23). In February, 2009, Liberty Mutual hired Jacques Whitford to perform a cause and origin groundwater investigation of Plaintiffs' residence, resulting in a letter from Speropolous confirming the details of how the subject incident occurred and that there was “property coverage for this loss.” (Id. at ¶ 26). At the request of Defendants, Plaintiffs also hired Alicon Environmental to conduct a site delineation. (Id. at ¶ 28). *2 On March 11, 2009, Plaintiffs hired Kevin Kennedy, a public adjuster, to “assist them in obtaining appropriate relief from Defendants.” (Id. at ¶ 29). Over the next several months, Plaintiffs received estimates and cost proposals from various individuals and companies regarding, among other things, the costs of inspections, remediation of the property, and demolition and removal of debris from the property. (Id. at ¶¶ 33, 35–36, 38, 43, 44). Beginning in July, 2009, Plaintiffs “could no longer continue residing in their home,” and relocated to a rental apartment. (Id. at ¶ 42). In September, 2009, because “Defendants still refused to release the policy limits to Plaintiffs” and Defendants failed to reimburse Plaintiffs for their expenses, the Pesotines retained counsel to assist them in obtaining the requested relief. (Compl., ¶ 50). On October 8, 2009, Speropolous informed Plaintiffs that “Defendants are agreeable to settling with the Pesotines prior to the start of remediation for the actual cash value of the home.” (Id. at ¶ 57). Plaintiffs continued to forward various estimates to Defendants over the next few months and, on December 10, 2009, Plaintiffs' counsel wrote to Defendants “regarding their continued failure to offer any response to the building damage loss/estimates, personal property loss/estimates and loss of use reimbursement demand in regards to the subject claim.” (Id. at ¶ 68). On January 8, 2010, Professional Claims Service (“PCS”) issued a Claim Report at the request of Defendants, assessing the value of the building loss at $151,185.93; debris removal at $6,120.00; and loss of other structures at $11,471.66. (Compl., ¶ 90). On January 19, 2010, PCS issued a revised Claim Report wherein it removed all costs for loss of other structures. (Id. at ¶ 101). In February, 2010, Defendants issued two checks, one in the amount of $850.00 for rent payment, and another in the amount of $151,185.93 for the actual cash value of Plaintiffs' home. (Id. at ¶ 107). Defendants had previously issued Plaintiffs checks in December, 2009, in the amount of $5,100 for payment for “Coverage D” of the insurance policy, and in the amount of $10,801.00 to Alicon. (Id. at ¶¶ 76, 79, 97). Subsequent to Defendants' payments in February, 2010, Plaintiffs and their representatives continued to correspond with Defendants and repeatedly forwarded invoices and cost proposals to Defendants. The Pesotines also paid various bills for costs related to, and as peripheral results of, the damage to their home, for some of which Defendants reimbursed Plaintiffs. (See generally, id. at ¶¶ 109–198). III. Standard of Review Case 4:16-cv-01347-MWB Document 74-8 Filed 06/27/17 Page 2 of 5 Pesotine v. Liberty Mut. Group, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 4215535 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 A complaint must be dismissed under Fed.R.Civ.P. 12(b)(6), if it does not allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The plaintiff must aver “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). *3 “Though a complaint ‘does not need detailed factual allegations, ... a formulaic recitation of the elements of a cause of action will not do.’ “ DelRio–Mocci v. Connolly Prop. Inc., 672 F.3d 241, 245 (3d Cir.2012) (citing Twombly, 550 U.S. at 555). In other words, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Covington v. Int'l Ass'n of Approved Basketball Officials, 710 F.3d 114, 118 (3d Cir.2013) (internal citations and quotation marks omitted). A court “take[s] as true all the factual allegations in the Complaint and the reasonable inferences that can be drawn from those facts, but ... disregard[s] legal conclusions and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Ethypharm S.A. France v. Abbott Laboratories, 707 F.3d 223, 231, n. 14 (3d Cir.2013) (internal citations and quotation marks omitted). Twombly and Iqbal require [a district court] to take the following three steps to determine the sufficiency of a complaint: First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief. Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir.2013). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not show [n]—that the pleader is entitled to relief.” Iqbal, 556 U.S. at 679 (internal citations and quotation marks omitted). This “plausibility” determination will be a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. IV. Analysis Defendants argue that Count III, alleging a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), must be dismissed for two reasons: (1) it is barred by the economic loss doctrine; and (2) Plaintiffs cannot establish all of the required elements of the claim. (Doc. 3, ¶¶ 16–17). We will address each argument in turn. A. Economic Loss Doctrine The economic loss doctrine “prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.” Werwinski v. Ford Motor Co., 286 F.3d 661, 671 (3d Cir.2002) (quoting Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir.1995)). As a result, “the doctrine prevents a plaintiff from recovering economic losses in tort without physical injury [and] ‘[w]here [a] plaintiffs only alleged damage is a diminution in the value of a product plaintiff has purchased, Pennsylvania law says that plaintiff's redress comes from the law of contract, not the law of tort.’ ” Martin v. Ford Motor Co., 765 F.Supp.2d 673, 684 (E.D.Pa.2011) (quoting Stein v. Fenestra Am., L.L.C., No. 09–5038, 2010 WL 816346, at *3 (E.D.Pa. Mar.9, 2010)). *4 In Werwinski, purchasers and leasers of Ford automobiles alleged the vehicles contained defective transmissions and brought a putative class action in against the manufacturer, asserting claims for breach of express warranty, breach of implied warranty, fraudulent concealment, and violations of UTPCPL. On appeal, the Third Circuit affirmed the Case 4:16-cv-01347-MWB Document 74-8 Filed 06/27/17 Page 3 of 5 Pesotine v. Liberty Mut. Group, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 4215535 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 District Court's application of the economic loss doctrine to the Appellant's claims under the UTPCPL, predicting that the Supreme Court of Pennsylvania would likely apply the economic loss doctrine to transactions involving ordinary consumers. Werwinski, 286 F.3d at 673–674. The Circuit also declined to carve out an exception for intentional fraud. Id. at 680–681. Relying on Knight v. Springfield Hyundai, 81 A.3d 940 (Pa.Super.Ct.2013), Plaintiffs argue that “recent case law from the Pennsylvania Superior Court stands in direct contrast to the Third Circuit's prediction in Werwinski ... as to the status of Pennsylvania jurisprudence concerning the economic loss doctrine.” (Doc. 5, at 12). In Knight, the Superior Court stated that “[o]ur research reveals ... that our Supreme Court has defined the economic loss doctrine as providing ‘no cause of action exists for negligence that results solely in economic damages unaccompanied by physical injury or property damage.’ “ Knight, 81 A.3d at 951–952 (emphasis in original), Plaintiffs misinterpret this language in Knight as narrowing the applicability of the economic loss doctrine to negligence actions, stating that “Plaintiffs do not seek redress under a theory of negligence, but rather maintain Defendants violated statutory provisions of the UTPCPL, a clear distinction” (Doc. 5, at 12). However, in footnote 9 of Knight, the Superior Court noted that there are other definitions of the economic loss doctrine, citing Debbs v. Chrysler Corp., 810 A.2d 137, 164 n. 32 (Pa.Super.2002) (the economic loss doctrine “prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract”) and Ellenbogen v. PNC Bank, N.A., 731 A.2d 175, 188 n. 26 (Pa.Super.1999) (the economic loss doctrine “bar [s] a plaintiff from recovering purely economic losses suffered as a result of a defendant's negligent or otherwise tortious behavior, absent proof that the defendant's conduct caused actual physical harm to a plaintiff or his property”). Further, in Knight, the allegations of fraud and misrepresentation occurred prior to the signing of any contract, making that case factually different from the action currently before this Court. All of Plaintiffs' allegations of dishonesty and misrepresentation and deceptive practices occurred after the policy of insurance was entered into by Plaintiff and Defendants. (See generally, Compl .). As a result, despite Plaintiffs arguments to the contrary, Knight, and similar Pennsylvania state case law, did not overrule Werwinski, which controls in this case. 1 Therefore, all of Plaintiffs' allegations under Count III are inextricably intertwined with the breach of contract claim such that they are barred by the economic loss doctrine or the “gist of the action” doctrine (barring tort claims “(1) arising solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract.” Reed v. Dupuis, 920 A.2d 861, 864 (Pa.Super.Ct.2007); see also, eToll, Inc., v. Elias/Savion Adv., Inc., 811 A.2d 10, 14 (Pa.Super.Ct.2002) (“Tort actions lie for breaches of duties imposed by law as a matter of social policy, while contract actions lie only for breaches of duties imposed by mutual consensus agreements.”)). Specifically, Plaintiffs' claims are based solely in contract because they are based on the insurance company's obligations under the policy of insurance, they represent claims for purely economic loss, and there is an absence of any allegation of actual physical harm to Plaintiffs or their property 2 . 1 Plaintiffs are correct that district courts in this Circuit have repeatedly recognized that Werwinski may be inconsistent with Pennsylvania law. See, e.g., Martin, 765 F.Supp.2d at 685 n. 8 (collecting cases). However, “[w]hile an issue such as this remains unsettled under Pennsylvania case law, this Court is bound by a Third Circuit decision where that court has predicted how the Pennsylvania Supreme Court will decide an issue,” Id. (internal citations and quotation marks omitted). Therefore, in the absence of a contrary decision by the Pennsylvania Supreme Court, we are bound by the Third Circuit's decision in Werwinski. 2 Plaintiffs admit that “the allegations against Liberty Mutual and First Liberty have nothing to do with them causing damage to [Plaintiffs'] property, no. It's their failure to honor the policy. The resulting factor in terms of the oil leak is the damage. It's what they didn't do under the policy.” (Unoff.Tr. 14–15). B. Elements of the UTPCPL Case 4:16-cv-01347-MWB Document 74-8 Filed 06/27/17 Page 4 of 5 Pesotine v. Liberty Mut. Group, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 4215535 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 *5 The UTPCPL prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” 73 Pa. Cons.Stat. § 201–3. The Consumer Law specifies the applicable unfair methods of competition and unfair or deceptive acts or practices, and includes a catchall provision. 73 Pa. Cons.Stat. § 201–2(4). “To establish liability under the UTPCPL's catchall provision a plaintiff must present evidence showing: (1) a deceptive act that is likely to deceive a consumer acting reasonably under similar circumstances; (2) justifiable reliance; and (3) that the plaintiff's justifiable reliance caused ascertainable loss.” Slapikas v. First American Title Ins., Co., 298 F.R.D. 285, 292 (W.D.Pa.2014) (citing Seldon v. Home Loan Servs., 647 F.Supp.2d 451, 470 (E.D.Pa.2009)). As Count III has already been dismissed due to the economic loss doctrine, it is unnecessary to determine whether the Plaintiffs adequately pleaded all of the required elements of this claim. Consequently, Defendants' motion to dismiss Count III on the basis that the element of justifiable reliance cannot be established as a matter of law (Doc. 4, at 14), and therefore Plaintiff cannot meet the second and third required elements, will be denied. V. Conclusion For the foregoing reasons, the court will grant Defendants' Motion to Dismiss Count III of Plaintiffs' Complaint with prejudice. (Doc. 3). A separate Order follows. ORDER AND NOW, THIS 25th DAY OF AUGUST 2014, upon consideration of Defendants', Liberty Mutual Group, Inc., and The First Liberty Insurance Corporation, Motion to Dismiss Count III of the Complaint (Doc. 3), and all accompanying briefs and oral argument, IT IS HEREBY ORDERED THAT Defendants' motion is GRANTED; to wit, Count III is DISMISSED WITH PREJUDICE. All Citations Not Reported in F.Supp.3d, 2014 WL 4215535 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-8 Filed 06/27/17 Page 5 of 5 Zeglen v. Northwestern Mut. Life Ins. Co., Not Reported in F.Supp.3d (2014) 2014 WL 4215531 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Disagreed With by Landau v. Viridian Energy PA LLC, E.D.Pa., November 30, 2016 2014 WL 4215531 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Kurt ZEGLEN, Plaintiff, v. NORTHWESTERN MUTUAL LIFE INSURANCE CO., Defendant. No. 3:14–CV–00173. | Filed Aug. 25, 2014. Attorneys and Law Firms Matthew P. Barrett, O'Malley, Harris, Durkin & Perry, P.C., Scranton, PA, for Plaintiff. Kevan F. Hirsch, Kaplin Stewart Meloff Rieter & Stein, PC, Blue Bell, PA, for Defendant. MEMORANDUM OPINION ROBERT D. MARIANI, District Judge. I. Introduction *1 Plaintiff Kurt Zeglen (“Zeglen” or “Plaintiff”) filed a four-count Complaint (Doc. 2) against Defendant Northwestern Mutual Life Insurance Company (“Northwestern” or “Defendant”), alleging breach of contract (Count I), “breach of the covenant of utmost fair dealing” (Count II), bad faith pursuant to 42 Pa.C.S.A. § 8371 (Count III), and violation of the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 Pa.C.S.A. §§ 201–1, et seq., (Count IV). Presently before the Court is Northwestern's Motion to Dismiss Counts II and IV (Doc. 6). For the reasons that follow, the Court shall grant Northwestern's Motion and dismiss Counts II and IV. II. Factual Allegations On October 21, 1988 and September 22, 1998, Northwestern issued Zeglen disability insurance policies. (Compl.¶¶ 3, 6). Zeglen, a licensed physician and board certified radiologist, became “disabled under the terms of the policy as he is unable to perform his duties as a radiologist[.]” (Id. at ¶¶ 20, 24, 50). On March 18, 2012, “Dr. Zeglen made a request for disability benefits asserting he last worked on March 22, 2011.” (Id. at ¶ 25). In submitting his request for disability benefits, Dr. Zeglen indicated that there were ‘multiple disabilities' and identified those to include the following: left above knee amputation; limited range of motion and use of left arm; aortic valve replacement, hypertension, cardiac arrhythmia; depression with associated anxiety and panic attacks; short term memory loss; right carpal tunnel syndrome; gastro-esophageal reflex disease; and hiatal hernia. Case 4:16-cv-01347-MWB Document 74-9 Filed 06/27/17 Page 1 of 5 Zeglen v. Northwestern Mut. Life Ins. Co., Not Reported in F.Supp.3d (2014) 2014 WL 4215531 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 (Id.). On August 28, 2012, Northwestern sent Zeglen a letter approving his claim for the period between February 16, 2012 to May 30, 2012. (Id. at ¶¶ 31–32). The August 28, 2012 letter indicated that Northwestern's consulting psychiatrist determined Zeglen's condition had improved to the point that his “symptoms were not rising to the level that they would be limiting [him] from work activity.” (Id. at ¶ 33) The letter went on to state that Northwestern would continue to make payments beyond May 30, 2012, subject to “additional information in order to obtain a thorough understanding of Dr. Zeglen's reported symptoms and limitations.” (Id. at ¶ 35). “Despite having previously advised in its August 28, 2012 letter that it would make disability payments beyond May 30, 2012,” Northwestern subsequently ceased issuing benefits. (Id. at ¶¶ 34–35). On November 29, 2012, Northwestern sent Zeglen a letter stating, “[l]f Dr. Zeglen is willing to participate in the evaluative medical examinations that we are requesting, we will provide benefits on an accommodation basis until we receive the reports from the examiners, which will allow us to continue our review of his request for disability benefits.” (Id. at ¶ 36). In accordance with the November 29, 2012 letter, Plaintiff underwent examinations scheduled by Defendant. (Id. at ¶¶ 37, 39). As agreed, Northwestern issued Zeglen payments for “disability benefits from June 30, 2012 and stated[,] in a letter dated January 9, 2013[,] that it was ‘willing to make a payment on an accommodation basis while the review continues.’ ” (Id. at ¶ 38). *2 “On March 8, 2013 and April 4, 2013, Defendant acknowledged that it had not yet completed its review.” (Id. at ¶ 41A 1 ). “Despite having agreed to make a payment during the review period, Defendant issued no payment to the Plaintiff in March 2013.” (Id . at ¶ 40B). “On March 18, 2013, Defendant sent a letter stating that it was declining the request of the Plaintiff for copies of the reports of Dr. Morgan and/or Dr. Fischbein,” the doctors who examined Zeglen in accordance with November 29, 2012 letter. (Id. at ¶¶ 37, 39, 41). The letter also stated Defendant would share the reports with Plaintiff's treating physician but only on the condition that his doctor not release the report to Plaintiff without Defendant's authorization. (Id. at ¶ 42). Northwestern has “continued to refuse to allow the release of the reports of Dr. Morgan and/or Dr. Fischbein[.]” (Id. at ¶ 45). 1 The Complaint contains a typographical error. There are two sets of Paragraphs 40 and 41. The Court will refer to the first set of Paragraphs 40 and 41 as Paragraph 40A and 41A. Accordingly, the second set will be designated Paragraph 40B and 41B. On November 3, 2013, Northwestern determined that Dr. Zeglen was not disabled beyond May 30, 2012 and denied Plaintiffs internal appeal of its decision. (Id. at ¶ 49). III. Standard of Review A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6), if it does not allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). The plaintiff must aver “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “Though a complaint ‘does not need detailed factual allegations, ... a formulaic recitation of the elements of a cause of action will not do.’ “ DelRio–Mocci v. Connolly Prop. Inc., 672 F.3d 241, 245 (3d Cir.2012) (citing Twombly, 550 U.S. at 555). In other words, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Covington v. Int'l Ass'n of Approved Basketball Officials, 710 F.3d 114, 118 (3d Cir.2013) (internal citations and quotation marks omitted). A court “take[s] as true all the factual allegations in the Complaint and the reasonable inferences that can be drawn from those facts, but ... disregard[s] legal conclusions and threadbare recitals of the elements of a cause of action, Case 4:16-cv-01347-MWB Document 74-9 Filed 06/27/17 Page 2 of 5 Zeglen v. Northwestern Mut. Life Ins. Co., Not Reported in F.Supp.3d (2014) 2014 WL 4215531 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 supported by mere conclusory statements.” Ethypharm S.A. France v. Abbott Laboratories, 707 F.3d 223, 231, n. 14 (3d Cir.2013) (internal citations and quotation marks omitted). Twombly and Iqbal require [a district court] to take the following three steps to determine the sufficiency of a complaint: First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief. *3 Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir.2013). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not shown—that the pleader is entitled to relief.” Iqbal, 556 U.S. at 679 (internal citations, alterations, and quotation marks omitted). This “plausibility” determination will “be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. IV. Analysis A. “Breach of the Covenant of Utmost Fair Dealing” (Count II) Count II of the Complaint alleges that Northwestern's actions “constituted a breach of the covenant of the utmost fair dealing inherent in insurance contracts.” (Id. at ¶ 56). Northwestern seeks to dismiss Count II on the ground that “Pennsylvania law does not provide a separate and independent cause of action for breach of the duty of good faith and fair dealing.” (Br. in Supp., Doc. 6, at 4). “There are two separate ‘bad faith’ claims that an insured can bring against an insurer: a contract claim for breach of the implied contractual duty to act in good faith, and a statutory bad faith tort claim under 42 Pa. Cons.Stat. Ann. Section 8371.” Tubman v. USAA Cas. Ins. Co., 943 F.Supp.2d 525, 529 (E.D.Pa.2013). Here, Zeglen alleges both, as well as a separate breach of contract claim. (Compl. at ¶¶ 52–60). “In Pennsylvania, the common law duty of good faith and fair dealing is implied in every contract.” Tubman, 943 F.Supp.2d at 529. “Pennsylvania Courts have consistently held” that where parties bring breach of contract claims and a common law bad faith claims simultaneously the “bad faith claim sounding in contract is subsumed within [the] breach of contract claim.” Fingles v. Cont'l Cas. Co., CIV.A.08–05943, 2010 WL 1718289, at *3 (E.D.Pa. Apr.28, 2010) (collecting cases). Following this case law, Count II (breach of the implied covenant of good faith) of the Complaint will be subsumed into Count I (breach of contract). Thus, the Court will dismiss Court II with prejudice. B. Unfair Trade Practices and Consumer Protection Law (Count IV) Count IV of the Complaint alleges that Northwestern violated the UTPCPL. (¶¶ 61–63). Northwestern asserts that the Complaint “alleges nothing more than failure to pay a disability insurance claim, non-feasance, which is not actionable under the UTPCPL.” (Br. in Supp. at 5–7). Defendant also contends Plaintiffs UTPCPL claim must be dismissed under the economic loss doctrine. (Id. at 7). Because Count IV is barred by the economic loss doctrine, the Court need not consider whether the Complaint alleges misfeasance, rather than mere non-feasance. Under Pennsylvania law, the economic loss doctrine “prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.” Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir.1995). Although the Pennsylvania Supreme Court has not considered whether the economic loss doctrine applies to UTPCPL claims, see Gadley v. Ellis, CIV.A. 3:13–17, 2014 WL 3696209, at *4 (W.D.Pa. July 23, 2014); the Third Case 4:16-cv-01347-MWB Document 74-9 Filed 06/27/17 Page 3 of 5 Zeglen v. Northwestern Mut. Life Ins. Co., Not Reported in F.Supp.3d (2014) 2014 WL 4215531 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Circuit has predicted that the doctrine applies to UTPCPL claims, Werwinski v. Ford Motor Co., 286 F.3d 661, 680– 81 (3d Cir.2002). *4 “The Werwinski decision has generated considerable criticism .” Gadley, WL 3696209, at *4 (citing O'Keefe v. Mercedes–Benz USA, LLC, 214 F.R.D. 266, 275 (E.D.Pa.2003) (engaging in a lengthy critique of Werwinski and declining to adopt the Third Circuit's reasoning); Martin v. Ford Motor Co., 765 F.Supp.2d 673, 685 n. 8 (“Since the Third Circuit decided Werwinski, numerous courts have recognized its reasoning may be inconsistent with Pennsylvania law.”) (collecting cases)). Despite this criticism, “a district court is bound by a Third Circuit decision where that court has predicted how the Pennsylvania Supreme Court will decide an issue.' “ Gadley, WL 3696209, at *5 (quoting Martin, 765 F.Supp.2d at 685 n. 8). As a result, Werwinski binds this Court. See Tubman, 943 F.Supp.2d at 531 (“Despite disagreement following Werwinski, it remains the controlling law unless revisited by the Pennsylvania Supreme Court.”). Courts have applied Werwinski in UTPCPL claims where allegedly deceptive conduct “is clearly interwoven with” an insurance contract. Id. at 530–31 (internal quotation marks omitted); Sicherman v. Nationwide Life Ins. Co., No. 11–7227, 2012 WL 1122737, at *4 (E.D.Pa. Apr.4, 2012) (dismissing a UTPCPL claim where a woman's claim that an insurance company deceived her late husband into letting his life insurance policy lapse was critically related to the alleged breach). Here, Zeglen's UTPCPL claim is clearly interwoven with his insurance contract. (See Compl. at ¶ 63). Plaintiff does not allege that he suffered damages aside from those arising from the insurance agreement. (Id.). 2 2 Zeglen's brief only devotes a paragraph to addressing Northwestern's economic loss argument, arguing The case law cited by Defendant to dismiss on the basis of the economic doctrine is not controlling. The Werwinski decision dealt with the lease of a vehicle. The Tubman decision is an out of district decision and it is respectfully submitted that more weight should be given to the Zaloga decision cited above. (Br. in Opp. at 13–14). As stated above, Werwinski is controlling. Tubman, 943 F.Supp.2d at 531. Zaloga v. Provident Life and Acc. Ins. Co. of America, 671 F.Supp.2d 623 (M.D.Pa.2009) does not discuss economic loss, and Tubman reflects current Third Circuit precedent. Thus, the economic loss doctrine bars Count IV, and the Court will dismiss it with prejudice. V. Conclusion For the foregoing reasons, the Court will grant Defendant's Motion and dismiss Counts II and IV with prejudice. A separate Order follows. ORDER AND NOW, THiS 25 TH DAY OF AUGUST 2014, upon consideration of Defendant's Motion to Dismiss (Doc. 6) and all accompanying briefs, IT IS HEREBY ORDERED THAT Defendant's Motion to Dismiss Count II (covenant of good faith and fair dealing) and Count IV (Unfair Trade Practices and Consumer Protection Law) of the Complaint (Doc. 2) is GRANTED. Counts II and IV are DISMISSED WITH PREJUDICE. Count I (breach of contract) and Count III (statutory bad faith) remain. All Citations Not Reported in F.Supp.3d, 2014 WL 4215531 Case 4:16-cv-01347-MWB Document 74-9 Filed 06/27/17 Page 4 of 5 Zeglen v. Northwestern Mut. Life Ins. Co., Not Reported in F.Supp.3d (2014) 2014 WL 4215531 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01347-MWB Document 74-9 Filed 06/27/17 Page 5 of 5 Aurra Fellows Neutral As of: June 27, 2017 9:48 PM Z Estate of Carl Stiles v. Chesapeake Appalachia, LLC Superior Court of Pennsylvania June 17, 2014, Decided; June 17, 2014, Filed No. 1346 MDA 2012 Reporter 2014 Pa. Super. Unpub. LEXIS 3037 * ESTATE OF CARL STILES, JUDY ARMSTRONG, AND ANGELINA FIORENTINO, Appellee v. CHESAPEAKE APPALACHIA, LLC, CHESAPEAKE ENERGY CORPORATION, NOMAC DRILLING, LLC, GREAT PLAINS OILFIELD RENTAL, LLC. AND DIAMOND Y ENTERPRISE, INC. Notice: NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 Subsequent History: Reported at Estate of Stiles v. Chesapeake, 105 A.3d 35, 2014 Pa. Super. LEXIS 3182 (Pa. Super. Ct., 2014) Prior History: [*1] Appeal from the Order Entered June 27, 2012 In the Court of Common Pleas of Bradford County Civil Division at No(s): 10-CV-000681. Core Terms Lease, operations, parties, arbitration, trial court, arbitration clause, drilling, Lessee, Residents, damages, oil, arbitration provision, first amended complaint, scope of arbitration, compel arbitration, motion to compel arbitration, contaminated, activities, adjoining, premises, lessor, pooled Judges: BEFORE: DONOHUE, J., OTT, J., and PLATT, J.*. MEMORANDUM BY OTT, J. Opinion by: OTT Opinion MEMORANDUM BY OTT, J.: * Retired Senior Judge assigned to the Superior Court. Chesapeake Appalachia, LLC, Chesapeake Energy Corporation, Nomac Drilling LLC, Great Plains Oilfield Rental LLC, and Diamond Y Enterprise, Inc., (collectively, "Chesapeake") appeal from the order entered on June 27, 2012, in the Court of Common Pleas of Bradford County overruling their preliminary objections seeking to compel arbitration of the lawsuit instituted by the Estate of Carl Stiles, Judy Armstrong, and Angelina Fiorentino. Chesapeake claims the trial court erred in construing that the term, "operations," as used in the arbitration provision of the parties' oil and gas lease, to cover only the lessee's operations on the leased premises and not (as in the present matter) on other lands. See Chesapeake's Brief at 3. After a thorough review of the submissions by the parties, the certified record, and relevant law, we affirm. The facts and procedural history are as follows: At the times relevant to this suit, Plaintiff [*2] Carl Stiles, now deceased, resided at the property ("the Property") located at 479 Quicks Bend Road, Sugar Run, Pennsylvania, with his wife, Plaintiff Judy Armstrong. Armstrong is the mother and biological parent of Plaintiff Angelina Fiorentino, who also resided at the Property.1,2 In 2009, Chesapeake engaged in drilling activities, and owned and operated four natural gas wells in Terry Township, Bradford County.3 Chesapeake located, drilled, and conducted oil and gas explorations of thewells ("the Wells") within approximately three miles of the Property and water supply. On January 12, 2010, Stiles entered into an oil and gas 1 We will refer to Stiles, Armstrong, and Fiorentino collectively as the "Residents." 2 Armstrong no longer resides at the Property. 3 The Wells were identified as #831081, #627644, #831206, and #831205. Case 4:16-cv-01347-MWB Document 74-10 Filed 06/27/17 Page 1 of 6 Page 2 of 6 Aurra Fellows lease ("Lease") with Chesapeake Appalachia, LLC.4 Pursuant to the Lease, Chesapeake Appalachia, LLC, acquired an interest in any oil and gas that lay beneath the Property.5 On October 27, [*3] 2010, Armstrong initiated this action by filing a complaint in law and in equity against Chesapeake Appalachia, LLC, Chesapeake Energy Corporation, and Nomac Drilling, Inc.6 She claimed her water supply was contaminated as a result of negligent actions by Chesapeake with respect to its drilling techniques and materials in relation to the Wells, which were not on the Property. Consequently, she asserted she was exposed to hazardous chemicals and materials, the value of her property went down, and she suffered damages. On November 30, 2010, Chesapeake served notice of removal of the case to the United States District Court for the Middle District of Pennsylvania on the basis of federal diversity jurisdiction. Chesapeake also filed a motion to dismiss on December 6, 2010. On January 20, 2011, Armstrong filed a first amended complaint in the district court. The amended complaint added Stiles and Fiorentino [*4] as plaintiffs, and non- diverse defendants Great Plains Oilfield Rental, LLC, and Diamond Y Enterprise, Inc. The amended complaint included the following causes of action: (1) the Hazardous Sites Cleanup Act; (2) negligence; (3) negligence per se; (4) private nuisance; (5) strict liability; (6) trespass; and (7) medical monitoring trust funds. The Residents also sought punitive and compensatory damages. On February 10, 2011, Chesapeake filed a motion to strike and a motion to dismiss the amended complaint. On February 18, 2011, the Residents then filed a motion to remand, claiming diversity no longer existed because Great Plains Oilfield Rental, LLC, and Diamond Y Enterprise, Inc., were non-diverse parties. On July 29, 2011, the federal district court (1) granted the Residents' 4 Armstrong and Fiorentino were not parties to the Lease. 5 During this time, Stiles passed away and Armstrong was subsequently named the administratrix for Stiles's estate on February 12, 2012. 6 Chesapeake Appalachia, LLC, is a West Virginia limited liability company. Chesapeake Energy Corporation is an Oklahoma corporation. Nomac Drilling, Inc., a subsidiary of Chesapeake Energy Corporation, is a Pennsylvania corporation with its principal place of business in Oklahoma City, Oklahama. motion to remand, (2) determined Chesapeake's motion to strike and motion to dismiss was moot, and (3) remanded the matter to the trial court. Upon remand, on September 14, 2011, Chesapeake filed a motion to compel arbitration pursuant to 42 Pa.C.S. § 7304(a) and for interim and permanent stay. On November 1, 2011, the Residents filed a memorandum of law in opposition to Chesapeake's motion to compel arbitration and to stay. On June [*5] 27, 2012, the trial court entered an order, and concomitant opinion, denying and dismissing Chesapeake's preliminary objections seeking to compel arbitration. This appeal followed.7 Chesapeake's sole issue is as follows: Whether the trial court erred when it concluded that the term "operations," as used in an arbitration provision in an oil and gas lease, covers only the lessee's operations on the leased premises and not (as here) on other lands, given that the arbitration provision does not so limit "operations" and the lease, considered in its entirety, evidences that the parties intended that "operations," as used in the arbitration provision, includes activities by the lessee that occur on or off the leased premises. See Chesapeake's Brief at 3. Specifically, Chesapeake states that in each count of the complaint, "the Residents allege that they sustained damages as a result of Chesapeake's activities that constitute [*6] 'operations,' as that term is used in the Lease." Id. at 8. Chesapeake contends "for purposes of the arbitration provision, there is a dispute 'concerning ... damages caused by Lessee's operations' and, therefore, the Residents' claims should be submitted to arbitration." Id. (citation omitted). Moreover, it points to the following two reasons for reversing the court's order: (1) the court's interpretation is inconsistent with the "plain meaning" of the arbitration provision, and as a matter of law, the plain meaning should govern; and (2) the court's interpretation disregards the parties' intent as separately evidenced by the Lease as a whole. Id. at 9-15. We begin with our well-settled standard of review: 7 On July 20, 2012, the trial court ordered Chesapeake to file a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b). Chesapeake filed a concise statement on August 9, 2012. The trial court issued a statement pursuant to Pa.R.A.P. 1925(a), relying on its June 27, 2012, opinion. 2014 Pa. Super. Unpub. LEXIS 3037, *2 Case 4:16-cv-01347-MWB Document 74-10 Filed 06/27/17 Page 2 of 6 Page 3 of 6 Aurra Fellows Our standard of review of a denial of preliminary objections in the nature of a petition to compel arbitration "is limited to determining whether the trial court's findings are supported by substantial evidence and whether the trial court abused its discretion in denying the petition." Midomo Co., Inc. v. Presbyterian Hous. Dev. Co., 1999 PA Super 233, 739 A.2d 180, 186 (Pa. Super. 1999). Where a party to a civil action seeks to compel arbitration of that action, a two-part test is employed to determine if arbitration is required. First, the trial court must determine if a valid agreement [*7] to arbitrate exists between the parties. Id. Second, if the trial court determines that such an agreement does exist, it must then determine if the dispute involved is within the scope of the arbitration provision. Id. "The scope of arbitration is determined by the intention of the parties as ascertained in accordance with the rules governing contracts generally." Henning v. State Farm Mut. Automobile Ins. Co., 2002 PA Super 80, 795, 795 A.2d 994, 996 (Pa. Super. 2002), citing, State Farm Mut. Automobile Ins. Co. v. Coviello, 233 F.3d 710, 716 3rd Cir. 2000). Pittsburgh Logistics Sys., Inc. v. Prof'l Transp. & Logistics, Inc., 803 A.2d 776, 779, 2002 PA Super 227 (Pa. Super. 2002). The interpretation of any contract is a question of law and this Court's scope of review is plenary. Moreover, "[w]e need not defer to the conclusions of the trial court and are free to draw our own inferences. In interpreting a contract, the ultimate goal is to ascertain and give effect to the intent of the parties as reasonably manifested by the language of their written agreement." When construing agreements involving clear and unambiguous terms, this Court need only examine the writing itself to give effect to the parties' understanding. This Court must construe the contract only as written and may not modify the plain meaning under the guise of interpretation. Szymanowski v. Brace, 2009 PA Super 218, 987 A.2d 717, 722 (Pa. Super. 2009) (quoting Abbott v. Schnader, Harrison, Segal & Lewis, LLP, 2002 PA Super 247, 805 A.2d 547, 553 (Pa. Super. 2002) (internal citations omitted)). [*8] "The task of interpreting a contract is generally performed by a court rather than by a jury. The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument." Maguire v. Ohio Casualty Ins. Co., 412 Pa. Super. 59, 602 A.2d 893, 894 (Pa. Super. 1992). Humberston v. Chevron U.S.A., Inc., 2013 PA Super 238, 75 A.3d 504, 509-510 (Pa. Super. 2013). "Where the language of the contract is ambiguous, the provision is to be construed against the drafter." State Farm Fire and Casualty Company v. PECO, 2012 PA Super 212, 54 A.3d 921, 928 (Pa. Super. 2012); see also Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 469 A.2d 563, 566 (Pa. 1983). Turning to the first element of the two-part test to determine if arbitration is required, whether a valid agreement to arbitrate exists between the parties, we note the trial court does not address this prong in its June 27, 2012, opinion. Moreover, the record establishes that the only named parties on the Lease are Stiles and Chesapeake Appalachia, LLC. See First Amended Complaint, 1/20/2011, Exhibit C at unnumbered 1. However, we are guided by the following: In general, only parties to an arbitration agreement are subject to arbitration. See Cumberland-Perry Area Vocational-Technical School v. Bogar & Bink, 261 Pa. Super. 350, 396 A.2d 433 (Pa. Super. 1978) (parties cannot be compelled to arbitrate disputes absent agreement to arbitrate). However, a nonparty, such as a third-party beneficiary, may fall within the scope of an arbitration agreement if that is the parties' intent. Cf. Highmark Inc. v. Hospital Service Association of Northeastern Pennsylvania, 2001 PA Super 278, 785 A.2d 93 (Pa. Super. 2001) (third-party beneficiary may enforce arbitration clause even though it [*9] is not a signatory to the contract). Smay v. E.R. Stuebner, Inc., 2004 PA Super 493, 864 A.2d 1266, 1271 (Pa. Super. 2004). Armstrong and Fiorentino could be considered third- party beneficiaries of the Lease either because they resided on the Property or are beneficiaries under Stiles's estate. Therefore, an agreement between the parties arguably existed. Nevertheless, for the reasons that follow, we find the arbitration clause does not encompass the dispute at issue. With respect to the second element of the test, whether, the dispute involved is within the scope of the arbitration provision, we note the Lease provided, in pertinent part: LEASING CLAUSE. Lessor hereby leases exclusively to Lessee all the oil and gas ..., and their liquid or gaseous constituents, whether hydrocarbon or non-hydrocarbon, 2014 Pa. Super. Unpub. LEXIS 3037, *6 Case 4:16-cv-01347-MWB Document 74-10 Filed 06/27/17 Page 3 of 6 Page 4 of 6 Aurra Fellows underlying the land herein leased, together with such exclusive rights as may be necessary or convenient for Lessee, at its election, to explore for, develop, produce, measure, and market production from the Leasehold, and from adjoining lands, using methods and techniques which are not restricted to current technology, including the right to conduct geophysical and other exploratory tests; to drill, maintain, operate, cease to operate, plug, abandon, and remove wells; to [*10] use or install roads, electric power and telephone facilities, and to construct pipelines with appurtenant facilities, including data acquisition, compression and collection facilities for use in the production and transportation of products from the Leasehold or from neighboring lands across the Leasehold, to use oil, gas, and non-domestic water sources, free of cost, to store gas of any kind underground, regardless of the source thereof, including the injecting of gas therein and removing the same therefrom; to protect stored gas; to operate, maintain, repair, and remove material and equipment. **** UNITIZATION AND POOLING. [Stiles] grants [Chesapeake Appalachia, LLC] the right to pool, unitize, or combine all or parts of the Leasehold with other lands, whether contiguous or not contiguous, leased or unleased, whether owned by Lessee or by others, at a time before or after drilling to create drilling or production units either by contract right or pursuant to governmental authorization. **** DISPOSAL AND INJECTION WELLS. [Stiles] hereby grants to [Chesapeake Appalachia, LLC] the right to drill wells and/or re enter existing wells, including necessary location, roadway and pipeline easements [*11] and rights of way, on any part of the Leasehold or lands pooled or unitized therewith for the disposal and/or injection into any subsurface strata ... including, but not limited to wells on the Leasehold or lands pooled or unitized therewith or from properties and lands outside the Leasehold, or lands pooled or unitized therewith, and to conduct all operations as may be required, for so long as necessary and required by [Chesapeake Appalachia, LLC] for purposes as herein provided. **** ARBITRATION. In the event of a disagreement between [Stiles] and [Chesapeake Appalachia, LLC] concerning this Lease, performance thereunder, or damages caused by [Chesapeake Appalachia, LLC]'s operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association. All fees and costs associated with the arbitration shall be borne equally by [Stiles] and [Chesapeake Appalachia, LLC]. First Amended Complaint, 1/20/2011, Exhibit C at unnumbered 3 (emphasis added). With respect to the substantive allegations raised by the Residents in the original complaint and first amended complaint, the Residents maintained Chesapeake was negligent [*12] in the drilling, construction, and operation of the Wells, such that "[m]ethane, ethane and other pollutants and industrial and/or residual waste, was caused to be discharged into or otherwise enter and contaminate the ground and aquifer near and under the [Residents'] home and into the ground water well used and relied upon as their water supply." See First Amended Complaint, 1/20/2011, at ¶ 26(a); see also Complaint At Law and in Equity, 10/27/2010, at 5. Moreover, in the Residents' opposition to Chesapeake's motion to compel arbitration and to stay, they averred that after executing the Lease, Chesapeake engaged in improper and negligent behavior during their oil and gas exploration and extraction activities on property near [the Residents'] property and which was unrelated to any oil or gas extraction activities on or under Stiles' property that was the subject of the lease. It was [Chesapeake's] actions on the nearby property, with no relation to the Lease between the parties to this action that proximately caused damage to [the Residents'] surface water, subsurface water and property and which are now the basis of the present action. It was not [Chesapeake's] actions resulting from the [*13] Lease between Stiles and [Chesapeake] that damaged [the Residents]. Further, nothing in the Lease expressly or reasonably requires that claims for personal injury and property damage from environmental contamination be arbitrated. The Residents' Memorandum of Law in Opposition to Chesapeake's Motion to Compel Arbitration and to Stay, 11/1/2011, at 5-6 (italics in original). In construing the Lease with respect to the Residents' allegations, the trial court found the following: None of [the Residents'] claims allege that the operations which contaminated [the Residents'] water supply arose from operations relating to the Stiles lease, but [Chesapeake's] motion to compel arbitration 2014 Pa. Super. Unpub. LEXIS 3037, *9 Case 4:16-cv-01347-MWB Document 74-10 Filed 06/27/17 Page 4 of 6 Page 5 of 6 Aurra Fellows implicitly suggests that a claim for damages arising from any of its operations must be referred to arbitration, if the party claiming damages has executed a lease containing the arbitration clause in question. There is no need for exegetical analysis of the scope of the arbitration clause. Clearly the parties to the lease intended that it would apply to operations involving a gas well drilled on Plaintiff Stiles's property. Conversely, it is equally clear that the arbitration clause would not apply to damage [*14] claims arising from some other operations, e.g., if Defendant Chesapeake Appalachia's corporate jet crashed into a car carrying [the Residents] on a California highway. The trial court holds that the arbitration clause, which identifies the principals as "Lessor" and "Lessee," was intended by the parties to govern disagreements which arise between them qua lessor and lessee. That is not the case here. All of [the Residents'] claims, sounding in trespass, would be viable in the absence of a lease. The lease is wholly incidental to the alleged cause of action. Trial Court Opinion, 6/27/2012, at 3 (italics in original). We agree. As indicated above, Chesapeake argues the parties' intent with respect to "on-premises and off premises 'operations'" is evidenced by the language in the leasing clause of the Lease, which precedes the arbitration clause. Specifically, Chesapeake notes the leasing clause references the following rights, given by Stiles as lessor to Chesapeake as lessee: (1) "to explore for, develop, produce, measure, and market production from the Leasehold, and from adjoining lands;" and (2) to "construct pipelines ... for use in the production and transportation of products from [*15] the Leasehold or from neighboring lands across the Leasehold[.]" Chesapeake's Brief at 12-13. Chesapeake requests this Court to interpret the Lease broadly, and to read the agreement as a whole, in order to find that the term "operations" includes those acts "on the leased premises but also all other operations," such as those on adjoining or neighboring lands. Id. at 12 (emphasis added). We cannot read the terms of the Lease so broadly as to mandate arbitration for the specific acts alleged in the complaint which sound in tort. We note there is some ambiguity as to the terms "adjoining lands" or "neighboring lands" as used in the Lease.8 However, it is unclear how a lessor could grant rights to a lessee to engage operations as prescribed in the Lease on "adjoining lands" that he or she does not own. Further, we are required to interpret the Lease against Chesapeake as the drafter. State Farm Fire and Casualty Company, 54 A.3d at 928. Consequently, the trial court did not abuse its discretion in refusing to interpret the Lease to include Chesapeake's operations on land that was three miles away from the Property as such activity fell outside the scope of the arbitration provision of the Lease.9 Lastly, we note that Chesapeake relies on several cases for the principle that arbitration clauses should be given the broadest interpretation. See Chesapeake's Brief at 10. However, we find that these cases are distinguishable from the present matter. For example, Chesapeake relies on Muhlenberg Township School Dist. Authority v. Pennsylvania Fortunato Constr. Co., 460 Pa. 260, 333 A.2d 184 (Pa. 1975), for the conclusion that "for purposes of [an] arbitration clause, '[t]o suffer damage in any manner' in our opinion is all inclusive' and 'claims' ... means all claims.'" Chesapeake's Brief at 10. However, Chesapeake's interpretation of Muhlenberg Township is misplaced as the arbitration provision in the case specifically provided: 1. Should either party to this Contract suffer damage in any manner because of any wrongful act or neglect of the other party or of anyone employed by him, then he shall be reimbursed by the other party for such damages. 2. Claims under this clause shall be made in writing to the party [*17] liable within a reasonable time at the first observance of such damage and not later than the time of final payment, except as expressly stipulated otherwise in the case of faulty work or materials, and shall be adjusted by agreement or arbitration. Muhlenberg Township, 333 A.2d at 186 (quotation 8 See State Farm Fire and Casualty Company, 54 A.3d at 928. 9 We note because the parties are at the [*16] early stage of the proceedings, if after discovery, it is determined that the contamination resulted from Chesapeake's operations on the Property, then the parties may be bound by the arbitration clause. However, based on the facts so far alleged, there is no evidence to support that conclusion. 2014 Pa. Super. Unpub. LEXIS 3037, *13 Case 4:16-cv-01347-MWB Document 74-10 Filed 06/27/17 Page 5 of 6 Page 6 of 6 Aurra Fellows marks and footnote omitted). The Pennsylvania Supreme Court rejected the argument that this language applies only to incidents involving injury to persons or property and concluded that "[t]o 'suffer damage in any manner' in our opinion is all inclusive and the provision: 'Claims . . . shall be adjusted by agreement or arbitration' means all claims." Id. Here, on the other hand, the arbitration provision was not all inclusive and did not encompass all claims where it specifically designated that arbitration could be compelled as to a disagreement regarding "performance thereunder, or damages caused by [Chesapeake Appalachia, LLC]'s operations" on the Property. First Amended Complaint, 1/20/2011, Exhibit C at unnumbered 3. As analyzed above, operations on another individual's property does not fall under the terms of the Lease. Moreover, Chesapeake cites to Ambridge Water Authority v. Columbia, 458 Pa. 546, 328 A.2d 498 (Pa. 1974) and Smay, supra, for the argument that the arbitration clause was framed in [*18] the broadest language and therefore, the scope of the provision was unlimited. Chesapeake's Brief at10. However, again, these arbitration clauses10 are different from the arbitration clause at issue because broad language was not used and the ability to compel arbitration was limited to operations on this specific property. Accordingly, we conclude the trial court did not err in denying Chesapeake's preliminary objections seeking to compel arbitration, as the trial court's findings are supported by substantial evidence and the court did not abuse its discretion in denying the petition. See Midomo Co., Inc., supra. Order affirmed. Judgment Entered. Judgment Entered. Date: 6/17/2014 10 See Ambridge Water Authority,328 A.2d at 499 (arbitration clause provided: "That any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration[.]."); Smay, 864 A.2d at 1271 (arbitration clause stated: "Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration ... except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5 [(Waiver of Claims: Final Payment)].") End of Document 2014 Pa. Super. Unpub. LEXIS 3037, *16 Case 4:16-cv-01347-MWB Document 74-10 Filed 06/27/17 Page 6 of 6