Arnold et al v. Chesapeake Energy Corporation et alREPLY BRIEF re MOTION to Compel Arbitration, To Dismiss Counts VII, VIII, and IX, and To Stay All Remaining Claims Pending ArbitrationM.D. Pa.June 27, 2017 UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA PAUL H. ARNOLD, et al., Plaintiffs, v. CHESAPEAKE ENERGY CORPORATION; CHESAPEAKE APPALACHIA, L.L.C.; CHESAPEAKE ENERGY MARKETING, INC.; CHESAPEAKE OPERATING, L.L.C., as successor by conversion to and f/k/a CHESAPEAKE OPERATING, INC.; ANADARKO PETROLEUM CORPORATION; ANADARKO E&P ONSHORE LLC, as successor by merger to and f/k/a ANADARKO E & P COMPANY, L.P.; WILLIAMS PARTNERS L.P. as successor by merger to and f/k/a ACCESS MIDSTREAM PARTNERS, L.P.; ACCESS MLP OPERATING, L.L.P.; APPALACHIA MIDSTREAM SERVICES, L.L.C.; and MITSUI E&P USA LLC, Defendants. Case No. 4:16-cv-01345-MWB (Judge Matthew W. Brann) Electronically Filed REPLY BRIEF IN SUPPORT OF THE CHESAPEAKE DEFENDANTS’ MOTION TO COMPEL ARBITRATION, TO DISMISS COUNTS VII, VIII, AND IX, AND TO STAY ALL REMAINING CLAIMS PENDING ARBITRATION Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 1 of 31 TABLE OF CONTENTS Page TABLE OF AUTHORITIES .................................................................................... ii INTRODUCTION ..................................................................................................... 1 ARGUMENT ............................................................................................................. 2 I. This Court and Others Have Affirmed the Broad Scope of the Arbitration Agreements in Plaintiffs’ Leases ........................................ 3 II. Plaintiffs’ Arbitration Agreements Apply to Their Common Law and Statutory Claims ............................................................................. 4 III. The Corporate Affiliates of Chesapeake Appalachia Can Enforce These Arbitration Agreements .............................................................. 7 A. Arthur Andersen Did Not Disturb Federal Decisional Law Cited by the Chesapeake Defendants .......................................... 8 B. Pennsylvania Law Permits Non-Signatories to Enforce Arbitration Agreements .............................................................. 9 C. Plaintiffs Cannot Evade Arbitration By Suing the Corporate Affiliates of Their Lease Counterparties ................. 14 IV. Plaintiffs’ Request for Declaratory Judgment Fails Under the Law ...................................................................................................... 17 V. Counts VII, VIII, and IX Should Be Dismissed and the Remaining Claims Should Be Stayed Pending Arbitration ................ 21 CONCLUSION ........................................................................................................ 22 Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 2 of 31 ii TABLE OF AUTHORITIES CASES Page(s) A.G.K. Sarl v. A.M. Todd Co., No. 07-2727, 2008 WL 724607 (E.D. Pa. Mar. 18, 2008) ....................... 9-10, 11 Alexander v. Chesapeake Appalachia, LLC, 839 F. Supp. 2d 544 (N.D.N.Y. 2012) .............................................................. 4-5 Booth v. BMO Harris Bank, N.A., No. 13-5968, 2014 WL 3952945 (E.D. Pa. Aug. 11, 2014) ......................... 10, 11 Caparra v. Maggiano’s Inc., No. 14-05722, 2015 WL 5144030 (E.D. Pa. Sept. 1, 2015) ............................... 11 Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir. 1995) ................................................................................ 19 Chesapeake Appalachia, L.L.C. v. Scout Petroleum, LLC, No. 4:14-cv-00620-MWB, slip op. (M.D. Pa. Apr. 28, 2017) ............... 1, 3, 4, 18 Children’s Hosp. of Phila. v. Am. Arbitration Ass’n, 331 A.2d 848 (Pa. Super. 1974) ................................................................... 19-20 Colon v. Conchetta, Inc., No. 17-0959, 2017 WL 2572517, slip op. (E.D. Pa. Jun. 14, 2017) ...................................................................................... 9, 10, 11, 15 Commonwealth ex rel. Kane v. Philip Morris, Inc., 128 A.3d 334 (Pa. Cmwlth. Ct. 2015) ................................................................ 20 Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir. 1995) .............................................................................. 6 Cott v. Waldron, LP, No. 15-1259, 2016 WL 3166269, slip op. (W.D. Pa. May 2, 2016), report and recommendation adopted, 2016 WL 3136906 (W.D. Pa. June 6, 2016) ....................................................................................................... 21 Dodds v. Pulte Home Corp., 909 A.2d 348 (Pa. Super. 2006) ................................................................... 10, 11 Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 3 of 31 iii E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir. 2001) ......................................................................... 13-14 Elwyn v. DeLuca, 48 A.3d 457 (Pa. Super. 2012) ..................................................................... 12, 13 Ford v. NYLCare Health Plans of the Gulf Coast, Inc., 141 F.3d 243 (5th Cir. 1998) ............................................................................ 6, 7 Griswold v. Coventry First LLC, 762 F.3d 264 (3d Cir. 2014) ........................................................................... 8, 11 Hope Christian Fellowship v. Chesapeake Energy Corp., No. 4:15CV02275, 2016 WL 5661607, slip op. (N.D. Ohio Sept. 29, 2016) .................................................................................................... 15 Hutchison v. Sunbeam Coal Corp., 519 A.2d 385 (Pa. 1986) ..................................................................................... 19 Koppers Co. v. Aetna Cas. and Sur. Co., 98 F.3d 1440 (3d Cir. 1996) ............................................................................... 11 Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., 845 F.3d 1351 (11th Cir. 2017) .......................................................................... 16 Leighton v. Chesapeake Appalachia, LLC, No. 1:13-CV-2018, 2013 WL 6191739 (M.D. Pa. Nov. 26, 2013) ...................... 3 Lumax Indus., Inc. v. Aultman, 669 A.2d 893 (Pa. 1995) ..................................................................................... 13 MacDonald v. Unisys Corp., 951 F. Supp. 2d 729 (E.D. Pa. 2013) .................................................................... 8 Millinghausen v. Drake, No. 1205 EDA 2013, 2014 WL 10936665 (Pa. Super. Apr. 24, 2014) ............. 15 Miron v. BDO Seidman, LLP, 342 F. Supp. 2d 324 (E.D. Pa. 2004) .................................................................. 21 Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042 (9th Cir. 2009) ...................................................................... 16, 17 Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 4 of 31 iv Neal v. Asta Funding, Inc., No. 13-3438, 2014 WL 131770 (D.N.J. Jan. 6, 2014) ....................................... 21 Ostroski v. Chesapeake Operating, LLC, No. 4:15-cv-02324-JEJ, slip op. (M.D. Pa. Sept. 30, 2016) ................................. 1 Phila. Reinsurance Corp. v. Emp’rs Ins. of Wausau, 61 F. App’x 816 (3d Cir. 2003) .......................................................................... 19 Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993) ....................................................................... 9, 11, 15 Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d 1085 (Pa. Super 2015) .................................................................. 11-12 Republic of Iraq v. ABB AG, 769 F. Supp. 2d 605 (S.D.N.Y. 2011) .......................................................... 16, 17 Roman v. Chesapeake Appalachia, LLC, No. 3:11cv1614, 2012 WL 2076846 (M.D. Pa. June 8, 2012) ......................... 3, 4 Ryan v. Dolan, No. 1561 WDA 2012, 2013 WL 11250884 (Pa. Super. Nov. 27, 2013) ........... 12 Sanford v. Bracewell & Guiliani, LLP, 618 F. App’x 114 (3d Cir. 2015) ........................................................................ 11 Specialty Bakeries, Inc. v. Robhal, Inc., No. 97-1057, 1997 WL 379184 (E.D. Pa. June 24, 1997) ................................. 19 Estate of Stiles v. Chesapeake Appalachia, L.L.C., No. 1346 MDA 2012, 2014 WL 10919559 (Pa. Super. Jun. 17, 2014) ............... 6 Torres v. CleanNet, U.S.A., Inc., 90 F. Supp. 3d 369 (E.D. Pa. 2015) ................................................................ 8, 11 Upper Lakes Towing Co. v. ZF Padova SpA, No. 2:08-CV-63, 2009 WL 4730762 (W.D. Mich. Dec. 4, 2009) ..................... 16 Vosburg v. Chesapeake Appalachia, LLC, No. 3:11-cv-1615, 2011 U.S. Dist. LEXIS 155364 (M.D. Pa. Nov. 16, 2011) .................................................................................................. 1, 3 Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 5 of 31 v White v. Sunoco Inc., 189 F. Supp. 3d 486 (E.D. Pa. 2016) .................................................................... 9 OTHER AUTHORITIES 11 Williston on Contracts § 1295 (3d ed. 1968) ...................................................... 19 Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 6 of 31 INTRODUCTION Plaintiffs’ response to the Chesapeake Defendants’ Motion to Compel Arbitration, here and in the three related actions,1 relies exclusively on language from one arbitration agreement. Under settled law, that agreement requires arbitration of Plaintiffs’ claims. This Court and others have already held that this very agreement provides for individual arbitration and broadly covers the claims Plaintiffs contend are beyond its reach, including claims against Chesapeake Appalachia’s corporate affiliates. See, e.g., Vosburg v. Chesapeake Appalachia, LLC, No. 3:11-cv-1615, 2011 U.S. Dist. LEXIS 155364 (M.D. Pa. Nov. 16, 2011) (finding tort claims arbitrable under same provision); Chesapeake Appalachia, L.L.C. v. Scout Petroleum, LLC, No. 4:14-cv-00620-MWB, slip op. at 12 (M.D. Pa. Apr. 28, 2017) (requiring individual arbitration under same provision); Ostroski v. Chesapeake Operating, LLC, No. 4:15-cv-02324-JEJ, slip op. (M.D. Pa. Sept. 30, 2016) (compelling individual arbitration of claims against Chesapeake Appalachia’s affiliates under same provision). Plaintiffs’ contrary arguments conflict with both the Leases and the law. Their contention that the Supreme Court’s Arthur Anderson decision obliterated decades of Third Circuit precedent on corporate affiliates’ arbitration rights in 1 R. Abrams v. Chesapeake Energy Corp., No. 4:16-cv-01346-MWB (M.D. Pa.), Ahern v. Chesapeake Energy Corp., No. 4:16-cv-01347-MWB (M.D. Pa.), P. Abrams v. Chesapeake Energy Corp., No. 4:16-cv-01343-MWB (M.D. Pa.). Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 7 of 31 2 related party transactions does not withstand scrutiny. Nor does their argument that the reference to “lessor” and “lessee” in an arbitration clause permits lessors to evade arbitration by suing the lessee’s affiliates. Finally, their demand that this Court intervene at the American Arbitration Association (“AAA”) to overrule the AAA’s filing procedures and permit the filing of a single mass arbitration is not supported by the “doctrine of necessary implication,” or any other doctrine for that matter. It is also telling that Plaintiffs filed the same opposition brief based upon a single arbitration provision in all four actions, when there are half a dozen different arbitration provisions at issue across those cases. While all of these arbitration agreements require individual arbitration, Plaintiffs’ attempt to ignore lease variations demonstrates the impropriety of treating all of these lessors as a uniform whole in mass proceedings. In short, Plaintiffs’ starting premise that all of these lessors share a common agreement is as flawed as their substantive arguments to avoid arbitration. ARGUMENT In their complaint, Plaintiffs allege that they agreed to the arbitration provision in the “Chesapeake Lease.” First Am. Compl. (“FAC”) ¶443. The Chesapeake Lease states: Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 8 of 31 3 In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee’s operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association .… This mandatory arbitration clause means the claims asserted here are arbitrable as to all of the Chesapeake Defendants. I. This Court and Others Have Affirmed the Broad Scope of the Arbitration Agreements in Plaintiffs’ Leases. Plaintiffs cannot refute that the scope of the arbitration provision in the Chesapeake Lease has already been addressed by this Court and by others in this circuit. See, e.g., Vosburg, 2011 U.S. Dist. LEXIS 155364; Roman v. Chesapeake Appalachia, LLC, No. 3:11cv1614, 2012 WL 2076846, at *4 (M.D. Pa. June 8, 2012); Leighton v. Chesapeake Appalachia, LLC, No. 1:13-CV-2018, 2013 WL 6191739, at *5 (M.D. Pa. Nov. 26, 2013). This is not new territory—courts have unequivocally found that very arbitration agreement to be broad enough to cover the kinds of claims asserted here. This Court has also already addressed the type of arbitration proceeding this exact provision contemplates. In Scout, this provision was found to require individual arbitration, as opposed to class arbitration. No. 4:14-cv-00620-MWB, slip op. at 12. The decision was based in part on the express language of the provision, which uses the phrase “concerning this lease” to describe the nature of the contemplated arbitration proceedings. Id. Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 9 of 31 4 In asking this Court to rule that the Chesapeake Lease’s arbitration agreement (1) does not apply to statutory or common law claims and (2) contemplates the filing of a mass arbitration on behalf of hundreds of lessors who each have their own lease, Plaintiffs seek a ruling that runs contrary to the reasoning in Scout and the other decisions that have addressed the scope of this agreement. There is no basis for reaching such a contrary conclusion here. II. Plaintiffs’ Arbitration Agreements Apply to Their Common Law and Statutory Claims. Plaintiffs’ arbitration agreements apply to their common law and statutory claims because they relate to, concern, and/or depend on Plaintiffs’ Leases. Chesapeake Defs.’ Br. (Dkt. 59) 8-10. Plaintiffs do not address the settled law cited by the Chesapeake Defendants on this point. Instead, Plaintiffs argue that their antitrust claims are divorced from their Leases, and therefore are not covered by their arbitration agreements. Plaintiffs’ position is belied by the law and their own pleading. The law is clear that Plaintiffs’ arbitration agreements broadly apply to common law and statutory claims that concern or relate to the Leases. See, e.g., Roman, 2012 WL 2076846, at *4 (Chesapeake Lease arbitration clause is broad enough to cover tort claims); Alexander v. Chesapeake Appalachia, LLC, 839 F. Supp. 2d 544, 553 (N.D.N.Y. 2012) (Chesapeake Lease arbitration provision is “extremely broad” and covers common law claims). Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 10 of 31 5 Unable to refute this point, Plaintiffs argue that their antitrust claims are not related to or dependent on their Leases. See Opp’n (Dkt. 62) 15-18. Not only is this argument illogical, but Plaintiffs’ own complaint disproves it. The alleged antitrust market is the market for the lease of gas, together with the rights to develop and produce “gas from the leased premises.” FAC ¶301 (emphasis added). Similarly, Plaintiffs claim that “[t]he effective monopsony held by the Chesapeake Defendants” allegedly led them to exercise “market power over payment of … royalties.” FAC ¶309. And, with respect to the alleged antitrust injury, Defendants purportedly caused “artificial depression of [Plaintiffs’] initial lease signing bonuses, royalty rates and lease terms, and the subsequent loss of royalties.” FAC ¶¶322, 304 (emphasis added). Plaintiffs cannot credibly argue that their antitrust allegations are untethered to their Leases and the entitlements and obligations that stem from them. Moreover, the cases upon which Plaintiffs rely in an effort to distance their antitrust claims from their Leases do not support their position. Opp’n 15-16 (citing Estate of Stiles v. Chesapeake Appalachia, L.L.C., No. 1346 MDA 2012, 2014 WL 10919559 (Pa. Super. Jun. 17, 2014); Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir. 1995); Ford v. NYLCare Health Plans of the Gulf Coast, Inc., 141 F.3d 243, 250 (5th Cir. 1998)). For example, Estate of Stiles is a non-precedential decision about an action for trespass (not antirust conspiracy), Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 11 of 31 6 which was unrelated to the lease at issue because the defendant’s operations that allegedly caused harm were not on plaintiff’s property, and therefore not under the ambit of their lease. Estate of Stiles, 2014 WL 10919559, at *6. Here, the alleged harm from the purported antitrust violation is underpaid bonuses and royalties that derive directly from Plaintiffs’ Leases. FAC ¶¶304, 322. Likewise, in Coors, the court found plaintiff’s antitrust claims were independent of the licensing agreement between plaintiff and one of the defendants. 51 F.3d at 1517. That licensing agreement with an arbitration provision was untethered to the alleged anticompetitive activity because the challenged conduct pertained to a completely separate contract between the two defendants. Id. at 1513, 1516-17. In contrast, the alleged anticompetitive conduct here explicitly pertains to Plaintiffs’ bonuses, mineral rights, and royalties, which all derive from the Leases containing arbitration agreements. Finally, Ford involves the arbitrability of a false advertising claim of a doctor against an HMO regarding its advertisement of a health care services plan. 141 F.3d at 246. The court found the false advertising claim was not arbitrable because it did not relate to the doctor’s referral agreement that contained the arbitration agreement. Id. at 251-52. Here, Plaintiffs’ alleged antitrust injury of underpaid lease bonuses and royalties is neither “completely independent” of Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 12 of 31 7 Plaintiffs’ Leases nor capable of being “maintained without reference to a contract.” Id. at 250. Plaintiffs have not supported their claim that their common law and antitrust claims are not arbitrable. The language of the Leases, the law interpreting the same and similar contractual provisions, and Plaintiffs’ own pleading all demonstrate that those claims fall within the broad reach of their arbitration agreements. III. The Corporate Affiliates of Chesapeake Appalachia Can Enforce These Arbitration Agreements. The corporate affiliates of Chesapeake Appalachia can enforce arbitration of Plaintiffs’ claims under equitable estoppel and related principles. Chesapeake Defs.’ Br. 13-18. To avoid arbitration, Plaintiffs argue that: (1) federal decisional law on the rights of non-signatories to compel arbitration is inapplicable under the Supreme Court’ s decision in Arthur Andersen; (2) Pennsylvania does not recognize the rights of non-signatories to enforce arbitration agreements under equitable estoppel principles and related theories; and (3) under their Leases, Plaintiffs can evade arbitration by suing the corporate affiliates of their contractual counterparty, rather than the counterparty itself. Opp’n 2-13. None of these positions is correct. Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 13 of 31 8 A. Arthur Andersen Did Not Disturb Federal Decisional Law Cited by the Chesapeake Defendants. The Chesapeake Defendants cited several state and federal decisions that apply equitable estoppel and related theories to permit non-signatory corporate affiliates to enforce arbitration agreements. Chesapeake Defs.’ Br. 13-18. In response, Plaintiffs assert that Arthur Andersen effectively overruled most of this precedent. Opp’n 4-6. The Third Circuit has squarely rejected this argument. In Griswold v. Coventry First LLC, the Third Circuit held that pre-Arthur Andersen federal decisions that are consistent with relevant state contract principles remain good law. 762 F.3d 264, 272 n.6 (3d Cir. 2014) (“Because we are satisfied that the Supreme Court’s decision in Arthur Andersen did not overrule Third Circuit decisions consistent with relevant state law contract principles, we may rely on our prior decisions so long as they do not conflict with these Georgia and Pennsylvania state law principles.”); see Torres v. CleanNet, U.S.A., Inc., 90 F. Supp. 3d 369, 379 n.7 (E.D. Pa. 2015) (same). In fact, even before Arthur Andersen, the Court of Appeals looked to state law to determine whether an arbitration clause could apply to non-signatories. See MacDonald v. Unisys Corp., 951 F. Supp. 2d 729, 736 (E.D. Pa. 2013) (“[T]he Third Circuit has recognized pre-Arthur Andersen that state law applies to determine whether nonparties may be bound by an arbitration agreement.”). Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 14 of 31 9 Likewise, Pennsylvania district courts are clear that “after Arthur Anderson, courts deciding motions to compel arbitration may still look to federal decisions applying the substantive law of the applicable state court[.]” White v. Sunoco Inc., 189 F. Supp. 3d 486, 491-92 (E.D. Pa. 2016) (citing Griswold, 762 F.3d at 272 n.6). Indeed, a decision issued this month cites Arthur Andersen, notes that “Pennsylvania law allows for a theory of equitable estoppel,” and then applies the same equitable estoppel theory espoused by the Chesapeake Defendants to compel arbitration. Colon v. Conchetta, Inc., No. 17-0959, 2017 WL 2572517, slip op. at *5-6 (E.D. Pa. Jun. 14, 2017). Plaintiffs’ assertion that the federal decisions cited by the Chesapeake Defendants have been rendered inapplicable by Arthur Andersen is plainly incorrect. B. Pennsylvania Law Permits Non-Signatories to Enforce Arbitration Agreements. Under Pennsylvania law, three related theories allow non-signatory corporate affiliates to enforce arbitration agreements. Chesapeake Defs.’ Br. 13- 18. The first was applied in Pritzker, where the Third Circuit compelled arbitration of claims against a “corporate sister” of the signatory defendant whose interests were “directly related to, if not predicated upon” the signatory’s conduct. Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1121-22 (3d Cir. 1993). The second theory applies where the “nonsignatory is alleged to have engaged in ‘substantially interdependent and concerted misconduct’ with a Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 15 of 31 10 signatory other than the plaintiff.” A.G.K. Sarl v. A.M. Todd Co., No. 07-2727, 2008 WL 724607, at *10 (E.D. Pa. Mar. 18, 2008) (citation omitted); accord Colon, 2017 WL 2572517, at *5. And the final theory is “equitable estoppel,” which applies where there is a close relationship between the entities involved and a connection between the alleged wrongs and the non-signatory’s obligations related to the contract. Booth v. BMO Harris Bank, N.A., No. 13-5968, 2014 WL 3952945, at *4 (E.D. Pa. Aug. 11, 2014) (citing E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 199 (3d Cir. 2001)). In application, courts often rely on more than one of these three related theories when allowing non-signatories to enforce arbitration agreements. The seminal case in Pennsylvania on this subject is Dodds, which held that non- signatories can enforce arbitration agreements where there is an “obvious and close nexus between non-signatories and the contract or the contracting parties.” Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa. Super. 2006). Contrary to Plaintiffs’ assertions, therefore, Pennsylvania law does permit non-signatories to compel arbitration against signatories under equitable estoppel and related principles. In state and federal cases post-dating Arthur Andersen, courts employ those concepts to do just that under Pennsylvania law. In fact, the Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 16 of 31 11 highest Pennsylvania appellate court to address the issue,2 as well as federal district courts applying Pennsylvania law,3 and the Court of Appeals applying Pennsylvania law4 all find that corporate affiliates of a signatory can enforce arbitration agreements on the grounds raised by the Chesapeake Defendants. Plaintiffs make much of the fact that the Pennsylvania Supreme Court has yet to address this exact issue, but their own case instructs federal courts to look to state intermediate appellate courts “[i]n the absence of guidance from the state’s highest court.” Koppers Co. v. Aetna Cas. and Sur. Co., 98 F.3d 1440, 1445 (3d Cir. 1996). This is exactly what the Third Circuit did in citing Dodds for the principle that Pennsylvania law allows for a theory of equitable estoppel in compelling arbitration. See Griswold, 762 F.3d at 271-72 (citing Dodds, 909 A.2d at 351). Plaintiffs claim Dodds is not “grounded in any controlling principles of Pennsylvania law,” Opp’n 6, but Dodds is a Pennsylvania Superior Court decision applying Pennsylvania law, and its holding has been recognized subsequently by three other Pennsylvania Superior Court decisions, see Provenzano, 121 A.3d at 2 See Dodds, 909 A.2d at 351-52; Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d 1085, 1097, 1103-04 (Pa. Super. 2015). 3 See, e.g., A.G.K. Sarl, 2008 WL 724607; Booth, 2014 WL 3952945; Caparra v. Maggiano’s Inc., No. 14-05722, 2015 WL 5144030 (E.D. Pa. Sept. 1, 2015); Torres, 90 F. Supp. 3d 369; Colon, 2017 WL 2572517, at *5-6. 4 See Griswold, 762 F.3d at 271-72; Pritzker, 7 F.3d at 1121-22; Sanford v. Bracewell & Guiliani, LLP, 618 F. App'x 114, 118 (3d Cir. 2015). Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 17 of 31 12 1097 (adopting Dodds’ “obvious and close nexus” test); Ryan v. Dolan, No. 1561 WDA 2012, 2013 WL 11250884, at *4 (Pa. Super. Nov. 27, 2013) (citing Dodds for the proposition that non-signatories can be covered by an arbitration agreement); Elwyn v. DeLuca, 48 A.3d 457, 463 (Pa. Super. 2012) (same). Indeed, even Elwyn—the decision Plaintiffs reference for the proposition that non- signatories may not enforce arbitration clauses that allegedly apply only to parties—cites Dodds as good law and recognizes that non-signatories may compel arbitration where there is “an obvious and close nexus between the non-signatories and the contract or the contracting parties.” Elwyn, 48 A.3d at 462-63. The circumstances that led the court not to enforce arbitration in Elwyn do not exist here. In Elwyn, the plaintiff (a non-profit organization) sued one of the members of its own board, who also served as the president of a construction company with which the non-profit contracted. Id. at 459-60. The defendant board member asserted that plaintiff’s claim that he had breached his fiduciary duty to plaintiff should be subject to the arbitration provision in the construction contract between plaintiff and his construction company. Id. at 460-61. Unlike here, where the non-signatory Chesapeake Defendants’ only connection to Plaintiffs is through the Leases, the Elwyn defendant’s duty and connection to the plaintiff as a board member was unrelated to the construction contract (and arbitration clause) he was seeking to enforce. The court, accordingly, Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 18 of 31 13 ruled that the defendant could not use the arbitration clause to compel arbitration of claims which were unrelated to the agreement. Id. at 462-64. Elwyn was not a case where the non-signatory seeking to enforce the arbitration agreement was a corporate affiliate of the signatory, nor was it a case where a plaintiff had sued both the signatory and non-signatory together on the basis of collective allegations of wrongdoing. Finally, Plaintiffs argue that Chesapeake Appalachia’s corporate affiliates cannot compel arbitration because companies are not permitted to “voluntarily pierce [their own] corporate veil” under Pennsylvania law. See Opp’n 12-13. None of the cases Plaintiffs cite regarding Pennsylvania’s presumptions against piercing the corporate veil has anything to do with compelling arbitration and none of them states that doing so requires improper corporate veil piercing. See Lumax Indus., Inc. v. Aultman, 669 A.2d 893, 895 (Pa. 1995) (refusing to disregard corporate form to hold company’s owner personally liable for corporate debt). Plaintiffs infer from the Third Circuit decision in DuPont that unlawful “piercing [of] the corporate veil” is somehow required for a non-signatory to enforce an arbitration agreement in a context like that presented here. Lumax, 669 A.2d at 895; Opp’n 12 (citing DuPont, 269 F.3d at 201). But that is not what DuPont says. In DuPont, the Court references a situation similar to the one presented here, where a non-signatory parent corporation invokes its subsidiary’s Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 19 of 31 14 arbitration agreement with the plaintiff. 269 F.3d at 201-02. The court commented in dicta that the non-signatory parent in such a situation can be said “[i]n essence” to have “pierc[ed] its own veil” in order to arbitrate claims derivative of its relationship with the subsidiary. Id. But the court was referencing this invocation of arbitration by the parent with approval as a matter of settled law, and contrasting that with the different situation presented in DuPont in which the subsidiary’s contractual counterparty seeks to compel the non-signatory parent to arbitrate against its will. That, the court reasoned, would be “piercing the corporate veil” in the prohibited sense. To suggest that DuPont can be read to restrict an affiliate’s right to invoke arbitration here turns DuPont on its head. In sum, Pennsylvania law permits non-signatories to enforce arbitration agreements where, as here, there is a close nexus between the non-signatories and the contract or the contracting parties. Because Chesapeake Appalachia, the Leases, and other Chesapeake Defendants are all closely related, all claims against the Chesapeake Defendants should be arbitrated. C. Plaintiffs Cannot Evade Arbitration By Suing the Corporate Affiliates of Their Lease Counterparties. Plaintiffs argue that the reference to “a disagreement between Lessor and Lessee” in their Leases means that any claims they assert against the Lessee’s corporate affiliates are not arbitrable. Opp’n 2-4. But accepting that interpretation of the Chesapeake Lease would eviscerate many arbitration agreements, as a Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 20 of 31 15 signatory could evade arbitration by simply suing the corporate affiliates of its contractual counterparty. For that reason, courts have repeatedly rejected this position, explaining that non-signatories can enforce arbitration agreements even when the arbitration clause references disputes “between” the parties. See, e.g., Millinghausen v. Drake, No. 1205 EDA 2013, 2014 WL 10936665, at *6 (Pa. Super. Apr. 24, 2014) (permitting non-signatory to enforce arbitration clause against a signatory); Pritzker, 7 F.3d at 1122 (allowing non-signatories to compel arbitration where arbitration clause specified “all controversies between the Trustees and MLPF & S”); Hope Christian Fellowship v. Chesapeake Energy Corp., No. 4:15CV02275, 2016 WL 5661607, slip op. at *2, 4-5 (N.D. Ohio Sept. 29, 2016) (compelling arbitration of claims against non-signatory Chesapeake affiliates where one lease form had “[i]n the event of a disagreement between Lessor and Lessee” language); Colon, 2017 WL 2572517, at *3, 5 (compelling arbitration of claims against a non-signatory under equitable estoppel where arbitration provision applied to all claims “between the Parties”). Indeed, Plaintiffs cannot have it both ways. In asserting their substantive allegations, Plaintiffs lump the Chesapeake Defendants together, but purport to segregate them for purposes of avoiding arbitration. See, e.g., FAC ¶¶24, 44, 211, 215, 218, 303, 308, 309, 315, 471. The law does not permit that. Plaintiffs have not addressed the decisions the Chesapeake Defendants cited, wherein courts reject Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 21 of 31 16 such gamesmanship and refuse to allow plaintiffs to group defendants collectively to allege misconduct and then draw lines between them to skirt arbitration. See Chesapeake Defs.’ Br. 12-13. The cases Plaintiffs cite are not to the contrary. For example, Plaintiffs cite Upper Lakes Towing Co. v. ZF Padova SpA for the proposition that there is a distinction between arbitration clauses that identify parties and those that do not. No. 2:08-CV-63, 2009 WL 4730762, at *1 (W.D. Mich. Dec. 4, 2009); Opp’n 3. But the defendant in Upper Lakes had no relationship with the parties to the contract containing the arbitration clause. 2009 WL 4730762, at *1. Similarly, Plaintiffs cite Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc. for the proposition that a non-party cannot enforce an arbitration agreement that applies to disputes between the parties (Opp’n 13-18), but that decision is based upon an aspect of Florida law that is different than Pennsylvania law on the same subject. 845 F.3d 1351, 1355 (11th Cir. 2017). Under Florida law, non-signatories must be agents, officers, or directors of a signatory before they can use equitable estoppel to enforce an arbitration clause that is limited to disputes between the parties. See id. As set forth above, Pennsylvania does not have the same requirements. Finally, both Mundi v. Union Security Life Insurance Co., 555 F.3d 1042 (9th Cir. 2009) and Republic of Iraq v. ABB AG, 769 F. Supp. 2d 605 (S.D.N.Y. Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 22 of 31 17 2011) are similarly distinguishable. In Mundi, the non-signatory seeking to compel arbitration had issued a life insurance policy to cover a loan taken out by the plaintiff’s decedent. 555 F.3d at 1043. Because the insurance contract was not intertwined with the loan agreement, the insurer could not enforce the arbitration provision in the loan agreement under California law. Id. at 1047. Likewise, in Republic of Iraq, the court found plaintiff could not enforce the arbitration clause in a banking agreement between the United Nations and an escrow account operator because the plaintiff did not have a “corporate relationship to a signatory party” or any significant relationship to the agreement itself. 769 F. Supp. 2d at 611 (citation omitted). Unlike these cases, the non-signatory Chesapeake Defendants are corporate affiliates of Chesapeake Appalachia and their alleged misconduct is tied into rights and obligations under the very Leases that contain the arbitration provisions they seek to enforce. IV. Plaintiffs’ Request for Declaratory Judgment Fails Under the Law. In their opposition brief, Plaintiffs characterize their request for declaratory judgment as “simply asking the Court to protect their right to have an arbitrator or arbitrators (rather than the AAA, as the administrator) decide [consolidation].” Opp’n 19. But what Plaintiffs have actually requested is an order overruling the Chesapeake Defendants’ objection to the filing of a single mass arbitration Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 23 of 31 18 proceeding and compelling the AAA to accept a filing that violates its requirements. There is no precedent for this extraordinary request. The AAA’s “one contract, one case” rule requires Plaintiffs to honor their agreements to individual arbitrations by filing separate demands. Plaintiffs want to flip this rule on its head, seeking this Court’s imprimatur to file a single mass arbitration proceeding in violation of the AAA’s requirements. Then, they say, the respondents in that mass arbitration can seek to de-consolidate the proceeding to conform to the arbitration agreements. Plaintiffs are effectively asking the Court to allow Plaintiffs to shift the burden to Defendants to undo that to which they never agreed. That is not what the Leases, the law, or the AAA filing procedures contemplate. Indeed, the Leases contemplate individual arbitration. The arbitration provision at issue here uses the phrase “concerning this lease,” FAC ¶443 (emphasis added), and this Court has already ruled that this language calls for an arbitration proceeding specific to each lease, Scout, No. 4:14-cv-00620-MWB, slip op. at 12. There are undoubtedly additional conflicting variations amongst the myriad of Plaintiffs’ arbitration provisions, so that a single mass arbitration could not possibly honor each of the Leases. Consistent with the Leases, the Chesapeake Defendants have repeatedly stated that they do not agree to consolidated arbitration proceedings. See FAC Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 24 of 31 19 ¶453. Where, as here, the putative respondents have not agreed to consolidate, such consolidation cannot be compelled. See Phila. Reinsurance Corp. v. Emp’rs Ins. of Wausau, 61 F. App’x 816, 821 n.4 (3d Cir. 2003) (“[A] district court cannot compel consolidation of arbitration absent an explicit agreement between the parties.”); Specialty Bakeries, Inc. v. Robhal, Inc., No. 97-1057, 1997 WL 379184, at *2 (E.D. Pa. June 24, 1997) (denying consolidation and explaining that neither the FAA nor the parties’ contract nor the Commercial Rules of the AAA provided for it); see also Champ v. Siegel Trading Co., 55 F.3d 269, 274-75 (7th Cir. 1995) (“absent an express provision in the parties’ arbitration agreement,” courts cannot order consolidation). Plaintiffs argue that an agreement to permit consolidation can be implied under the doctrine of necessary implication. Pennsylvania law is clear, however, that the Court cannot imply a term into the Leases that contradicts their express terms. See Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 388 (Pa. 1986) (“The law will not imply a different contract than that which the parties have expressly adopted.”); 11 Williston on Contracts § 1295 (3d ed. 1968) (implied terms must be consistent with express terms and necessary to effectuate intent of parties). Implying consent to mass arbitration here would violate this basic principle. Moreover, the circumstances in which the doctrine of necessary implication has applied could not be further from those presented here. In Children’s Hospital Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 25 of 31 20 of Philadelphia v. American Arbitration Ass’n (“CHOP”), the Court was asked to consolidate two individually filed arbitrations where the identical issue to be resolved in each was to apportion liability among the contractor defendants for a single construction incident. 331 A.2d 848, 236 (Pa. Super. 1974). Unlike CHOP, Plaintiffs here have not filed any pending arbitrations, but instead seek this Court’s permission to file a single mass arbitration on behalf of hundreds of lessors with varying lease forms, on claims that are not about apportioning liability across defendants for a single common incident. CHOP has no bearing on the circumstances presented here. The only other case Plaintiffs rely on, Commonwealth ex rel. Kane v. Philip Morris, Inc., involved a request by Phillip Morris for separate and individual arbitrations under a multi-party contract that called for a single aggregated arbitration among all the parties. 128 A.3d 334, 353 (Pa. Cmwlth. Ct. 2015). In other words, Philip Morris is the very opposite of this situation. The court there ordered aggregate and consolidated arbitration because that is what the governing agreement required. The court cites CHOP for the proposition, not disputed here, that an agreement to consolidate can be implied on the right facts. Id. But those facts do not exist here. The Court cannot imply a term that is directly contrary to the express Lease provisions that provide for individual arbitration. Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 26 of 31 21 V. Counts VII, VIII, and IX Should Be Dismissed and the Remaining Claims Should Be Stayed Pending Arbitration. Given Plaintiffs’ acknowledgement that “all parties agree” Counts VII and VIII are subject to mandatory arbitration, Opp’n 21, there is no reason not to dismiss them. See Cott v. Waldron, LP, No. 15-1259, 2016 WL 3166269, slip op. at *5 (W.D. Pa. May 2, 2016) (dismissing counterclaim that was subject to arbitration), report and recommendation adopted, 2016 WL 3136906 (W.D. Pa. June 6, 2016). Plaintiffs also agree that, should the Court compel the remainder of the claims to arbitration, they should be stayed while those arbitrations proceed. Opp’n 21. Plaintiffs assert that they would be unfairly prejudiced by a stay of litigation of any claims deemed non-arbitrable, but they do not provide any support for that assertion. Although the Chesapeake Defendants believe it is premature to decide how to handle any claims deemed non-arbitrable, the law supports a stay of the entire proceeding even if some claims remain in court. See Miron v. BDO Seidman, LLP, 342 F. Supp. 2d 324, 334 (E.D. Pa. 2004) (“[T]he FAA’s requirement that a court stay ‘the trial of the action’ suggests that the proceedings must be stayed in their entirety, even when the action encompasses both arbitrable and non-arbitrable claims.”); Neal v. Asta Funding, Inc., No. 13-3438, 2014 WL 131770, at *3 (D.N.J. Jan. 6, 2014) (“[A] court may stay the entire court action … even if some of the parties or issues are not subject to arbitration.”). Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 27 of 31 22 CONCLUSION For the foregoing reasons, the Chesapeake Defendants respectfully request an order granting their motion, compelling all claims against them to individual arbitration, dismissing Counts VII, VIII, and IX, and staying the remaining claims while those arbitrations proceed. Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 28 of 31 23 Dated: June 27, 2017 By: /s/ John B. Dempsey Daniel T. Brier John B. Dempsey MYERS BRIER & KELLY, LLP 425 Spruce Street, Suite 200 Scranton, PA 18503 Tel: (570) 342-6100 Fax: (570) 342-6147 E-mail: dbrier@mbklaw.com jdempsey@mbklaw.com Seamus C. Duffy (pro hac vice) Kathryn E. Deal (pro hac vice) DRINKER BIDDLE & REATH LLP One Logan Square, Suite 2000 Philadelphia, PA 19103 Tel: (215) 988-2700 Fax: (215) 988-2757 E-mail: seamus.duffy@dbr.com kathryn.deal@dbr.com Daniel T. Donovan (pro hac vice) KIRKLAND & ELLIS LLP 655 Fifteen Street, NW Washington, DC 20005 Tel: (202) 879-5000 Fax: (202)879-5200 Email: ddonovan@kirkland.com Attorneys for Defendants Chesapeake Energy Corporation, Chesapeake Appalachia, L.L.C., Chesapeake Energy Marketing, L.L.C., and Chesapeake Operating, L.L.C. Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 29 of 31 CERTIFICATE OF SERVICE I hereby certify that on June 27, 2017, a copy of the foregoing was filed electronically. Notice of this filing will be sent to all parties who have appeared in this action via the Court’s electronic filing system. Parties may access this filing through the Court’s system. /s/ John B. Dempsey John B. Dempsey Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 30 of 31 CERTIFICATE OF COMPLIANCE I hereby certify pursuant to L.R. 7.8(b)(2) that the text of this filing contains 4,812 words, excluding the caption, Table of Contents, Table of Authorities, and signature blocks, which is within the limit of 5,000 words as permitted by the Local Rules. /s/ John B. Dempsey John B. Dempsey Case 4:16-cv-01345-MWB Document 73 Filed 06/27/17 Page 31 of 31 APPENDIX OF UNPUBLISHED OPINIONS A. A.G.K. Sarl v. A.M. Todd Co., No. 07-2727, 2008 WL 724607 (E.D. Pa. Mar. 18, 2008) B. Booth v. BMO Harris Bank, N.A., No. 13-5968, 2014 WL 3952945 (E.D. Pa. Aug. 11, 2014) C. Caparra v. Maggiano’s Inc., No. 14-05722, 2015 WL 5144030 (E.D. Pa. Sept. 1, 2015) D. Chesapeake Appalachia, L.L.C. v. Scout Petroleum, LLC, No. 4:14-cv-00620-MWB, slip op. (M.D. Pa. Apr. 28, 2017) E. Colon v. Conchetta, Inc., No. 17-0959, 2017 WL 2572517, slip op. (E.D. Pa. Jun. 14, 2017) F. Cott v. Waldron, LP, No. 15-1259, 2016 WL 3166269, slip op. (W.D. Pa. May 2, 2016) G. Cott v. Waldron, LP, No. 15-1259, 2016 WL 3136906 (W.D. Pa. June 6, 2016) H. Hope Christian Fellowship v. Chesapeake Energy Corp., No. 4:15CV02275, 2016 WL 5661607, slip op. (N.D. Ohio Sept. 29, 2016) I. Leighton v. Chesapeake Appalachia, LLC, No. 1:13-CV-2018, 2013 WL 6191739 (M.D. Pa. Nov. 26, 2013) J. Millinghausen v. Drake, No. 1205 EDA 2013, 2014 WL 10936665 (Pa. Super. Apr. 24, 2014) K. Neal v. Asta Funding, Inc., No. 13-3438, 2014 WL 131770 (D.N.J. Jan. 6, 2014) L. Ostroski v. Chesapeake Operating, LLC, No. 4:15-cv-02324-JEJ, slip op. (M.D. Pa. Sept. 30, 2016) M. Roman v. Chesapeake Appalachia, LLC, No. 3:11cv1614, 2012 WL 2076846 (M.D. Pa. June 8, 2012) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 1 of 136 2 N. Ryan v. Dolan, No. 1561 WDA 2012, 2013 WL 11250884 (Pa. Super. Nov. 27, 2013) O. Specialty Bakeries, Inc. v. Robhal, Inc., No. 97-1057, 1997 WL 379184 (E.D. Pa. June 24, 1997) P. Estate of Stiles v. Chesapeake Appalachia, L.L.C., No. 1346 MDA 2012, 2014 WL 10919559 (Pa. Super. Jun. 17, 2014) Q. Upper Lakes Towing Co. v. ZF Padova SpA, No. 2:08-CV-63, 2009 WL 4730762 (W.D. Mich. Dec. 4, 2009) R. Vosburg v. Chesapeake Appalachia, LLC, No. 3:11-cv-1615, 2011 U.S. Dist. LEXIS 155364 (M.D. Pa. Nov. 16, 2011) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 2 of 136 A Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 3 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2008 WL 724607 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. A.G.K. SARL v. A.M. TODD COMPANY, et al. Civil Action No. 07-2727. | March 18, 2008. Attorneys and Law Firms Stephen R. Bolden, Fell & Spalding, Phila, PA, Ben Whaley LeClercq, Charleston, SC, for A.G.K. Sarl. John W. Allen, Kathryn D. Soulier, Varnum Riddering Schmidt & Howlett LLP, Kalamazoo, MI, Joseph G. Derespino, Derespino & Dougher PC, Philadelphia, PA, for A.M. Todd Company, et al. MEMORANDUM AND ORDER McLAUGHLIN, District Judge. *1 The plaintiff has filed suit on contract and non-contract grounds against the defendants, two corporations and an individual. The plaintiff alleges that it shipped vanilla beans to the defendants or one of the corporate defendants' subsidiaries in early 2004, but neither the defendants nor the subsidiary ever paid for the beans. In 2005, the plaintiff filed an arbitration proceeding against the subsidiary. The plaintiff claimed that it and the subsidiary had a contract for the sale of vanilla that included an arbitration clause. The plaintiff withdrew from the arbitration proceeding in February 2007, just before the final hearing was scheduled to occur, citing concerns that the subsidiary was judgment-proof and a sham corporation. A few months after the arbitration proceeding terminated, the plaintiff brought this suit. This suit seeks to hold the defendants liable in three distinct ways: first, the plaintiff alleges that the corporate veil of the subsidiary should be pierced to hold the defendants liable for the subsidiary's liabilities; 1 second, the plaintiff alleges that one or more of these defendants are directly liable as parties to the contract with the plaintiff; and third, the plaintiff alleges that the defendants are directly liable under two non-contract theories- conversion and unjust enrichment. Under all of these theories, the plaintiff seeks to pierce the corporate veil of one of the corporate defendants in order to hold the other two defendants liable. 1 The plaintiff alleges both a corporate-veil-piercing theory and an alter ego theory. This Court has recognized that these theories, though similar, are not identical. Brown v. Astro Holdings, Inc., 385 F.Supp.2d 519, 524 & n. 3 (E.D.Pa.2005). The distinctions between these two theories are not material to the Court's decision here. The Court will therefore sometimes refer to piercing the corporate veil when it also means to include the plaintiff's alter ego theories. The defendants have filed a Motion to Dismiss, or in the Alternative to Change Venue. The defendants argue that the plaintiff is estopped from filing suit here and from taking various factual positions here because it previously brought and abandoned arbitration proceedings in which it took contrary positions. They argue further that this Court lacks jurisdiction over this dispute because of the arbitration clause. Additionally, the motion argues that the plaintiff does not plead piercing the corporate veil with enough specificity, and that venue is proper only in the Southern District of New York because New York was the agreed-upon situs of the arbitration and would be the location of any appeal from an arbitration judgment. The Court will grant the motion. The Court finds that all matters in this suit are arbitrable, but it will stay, rather than dismiss, the case. The plaintiff consented to arbitrate its claims when it brought and prosecuted the arbitration proceeding against the defendants' subsidiary. Although the defendants did not sign the arbitration agreement, they have standing to enforce the arbitration agreement against the plaintiff. The plaintiff cannot bring any claims here that purport to pierce the subsidiary's veil, before it first establishes the subsidiary's liability in arbitration. To the extent that the plaintiff tries to hold the defendants directly liable under the contract that includes the arbitration clause, the plaintiff must arbitrate such claims. Finally, under the liberal federal policy favoring arbitration, the Court finds that the scope of the plaintiff's consent to arbitrate is broad enough to cover all of the Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 4 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 claims that the plaintiff raises here, even its non-contract claims, because the factual allegations necessary to prove these claims are so intertwined with one another. Having found the claims in this suit arbitrable, the Court stays these proceedings pending arbitration. I. Facts A. Legal Standard *2 A motion to stay a suit in favor of arbitration is treated as a motion for summary judgment because the Court must decide the question of whether the parties have agreed to submit the dispute to arbitration. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 & n. 9 (3d Cir.1980). Although the defendants do not ask this Court to compel arbitration, they do ask this Court to find that this suit was improperly brought because the plaintiff's claims are subject to binding arbitration. Tr. Oral Arg. at 34, 56-57. The summary judgment standard, therefore, applies to the present motion. The Court will view the facts in the light most favorable to the plaintiff. 2 2 On a motion for summary judgment, a court must view the evidence and draw reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is proper if the pleadings and other evidence on the record “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). Parts of the Court's decision rest on the relationship between the plaintiff's claims and the arbitration clause that the Court rules is applicable. The Court has relied on the complaint in construing the relationship between the plaintiff's claims and the arbitration clause. The determination does not rely on any facts that are in dispute. The Court draws the following facts from three sources: the complaint, the papers filed in the earlier arbitration, and the parties' papers regarding the motion to dismiss. The Court will not set forth all of the details of the parties' dealings because many are not relevant to the disposition of the present motion. B. The Complaint The plaintiff, A.G.K. Sarl (“AGK”), is a vanilla bean exporting company based in the Comoros, an island nation located between Madagascar and mainland Africa. AGK is owned and directed by Amine Kalfane, a citizen of the Comoros. Defendant A.M. Todd Company (“A .M. Todd”) is a Michigan company, while defendant Zink and Triest Company (“ZTC”) is a Delaware corporation and has its principal place of business in Montgomeryville, Pennsylvania. Defendant Henry W. Todd, Jr. (“Todd”), a citizen of Pennsylvania, is a director of ZTC and of A.M. Todd. The corporate defendants are engaged in the food additives and flavorings business. Compl. ¶¶ 1-4. The defendants began purchasing large quantities of vanilla from the plaintiff in the 1990s. AGK would act as purchasing agent for the defendants, with ZTC always serving as the consignee on the contract. ZTC frequently provided down payments to AGK to finance vanilla production. By 1996, ZTC was buying nearly all of AGK's vanilla output. Compl. ¶¶ 6-9. In the fall of 2003, AGK and the defendants entered into an agreement that AGK would sell a large quantity of vanilla to the defendants. Todd urged AGK to buy up as much vanilla as possible-more than AGK would have otherwise. In September 2003, the defendants advanced $3 million to AGK toward its 2003 vanilla crop. AGK borrowed a large additional sum in order to procure as much vanilla as possible. Todd told AGK that, because of global vanilla shortages, the price for vanilla would be $575 per kilogram for high quality vanilla. AGK sold all of its vanilla output to the defendants, turning down several other offers to buy its vanilla. Nearly all of the defendants' correspondence with AGK was on ZTC letterhead. Compl. ¶¶ 11-12, 14-16, 18, 20. *3 The parties reached agreement on all significant terms of the sale by the end of 2003. One shipment of vanilla was to include 17 tons of vanilla beans at a cost of $570 per kilogram (“Tranche 1”). The remaining vanilla was to be sold on consignment, with ZTC negotiating the best price possible with the ultimate customer, between $500 and $510 per kilogram. This remaining vanilla included a shipment of more than six tons (“Tranche 2”) and several additional shipments of about 6.5 tons (“the airway bills”). Compl. ¶ 22. The defendants created Zink and Triest International (“ZTI”) before 2001 to be the nominal buyer in Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 5 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 such vanilla contracts. ZTI is an “offshore” “dummy” corporation organized under the laws of Mauritius. It is a wholly owned subsidiary of one or more of the defendants. At all relevant times, ZTI had no existence apart from the defendants, was grossly undercapitalized, did not engage in arms-length transactions or corporate formalities, and was operated by the defendants “solely as a shell, artifice and façade with the attempted purpose of unjustly limiting Defendants' exposure in contracts with foreign parties.” Compl. ¶¶ 23-25. On January 14, 2004, after AGK had finished acquiring, preparing, packing, and readying the vanilla for shipment, it received a document (“Contract 11204”) on ZTI letterhead, signed by Todd on behalf of ZTI. ZTC is listed as the consignee. 3 Contract 11204 “memorializes some of the terms of the agreement the parties had previously reached, and unilaterally claims to modify other terms, such as payment and acceptance terms.” AGK did not sign the document and used it only as a formality for customs purposes. Contract 11204 specifies the quantity and price of the beans to be sold. Tranche 1, weighing 17,750.05 kilograms, would be sold for $570 per kilogram. Tranche 2, weighing 6,975.15 kilograms, would be sold at a price to be determined. The document recites that payment for Tranche 1, less the $3 million advance, will be due “immediately upon payment by Z & T's customer.” Tranche 2 is specified to be on consignment. Compl. ¶ 28-30. 4 3 The complaint states that “the insurance clause refers to Zink and Triest [ZTC] as the buyer,” but this characterization is inaccurate. Contract 11204 refers to ZTI as the buyer. Compl. ¶ 30; Ex. A to the Compl. 4 AGK attaches a copy of Contract 11204 as Exhibit A to its complaint. The complaint does not, however, mention the arbitration clause, the contents of which the Court will discuss in Section I.C. below. The defendants had approved samples of the vanilla that was sent in Tranche 1 and Tranche 2. The beans left the Comoros on January 14, 2004, and arrived in Philadelphia on January 15, 2004. The market price for vanilla was dropping as the beans arrived in Philadelphia. Although it is industry standard for the consignee or buyer to notify the seller within two to three days of any problems with a shipment, ZTC did not mention any problem with the quality of Tranche 1 until eight weeks later on March 9, 2004, one day after a cyclone in Madagascar destroyed a large portion of ZTC's stock and caused liquidity problems for ZTC. Compl. ¶¶ 32-34, 39, 47-49. Unbeknownst to AGK at the time, the ultimate customer for the vanilla was Coca-Cola, which had tested and approved samples of the beans. The defendants unilaterally gave Coca-Cola extra time to inspect the beans. Even after ZTC expressed concerns about the quality of the beans, ZTC sent AGK additional payments in April 2004 totaling $1.7 million. ZTC's CFO, Brian Scott, e-mailed AGK indicating that the defendants intended to pay the balance owed. Compl. ¶¶ 44, 45, 50, 53-55. *4 AGK sent Tranche 2 to the defendants on January 29, 2004, and it arrived in Philadelphia on January 30, 2004. On or about February 6, 2004, the plaintiff sent the defendants two shipments on consignment. These shipments, known as the airway bills, were listed as AWB 1473878 (2,149 kilograms of vanilla) and AWB 90134704 (4,400 kilograms of vanilla). The parties had agreed that these shipments would be treated in the same manner as Tranche 2, that is, to be sold on consignment for at least $500 per kilogram. On February 24, 2004, the defendants informed AGK that these three shipments required “restorative measures” in order to be suitable for sale. AGK agreed to these measures. Compl. ¶¶ 41, 42, 46. The defendants ultimately claimed that Coca-Cola had rejected the shipment. The defendants never paid for any of the vanilla beyond the advances described above. They kept the beans and asserted that they were attempting to mitigate damages by mixing the beans that AGK had shipped with other beans, and then selling the mixture. Compl. ¶¶ 56, 57. As of April 2005, ZTC is no longer operating. A.M. Todd has taken over all of its accounts and functions. As of April 8, 2005, all payments for vanilla bought from ZTC were to be made to A.M. Todd. Compl. ¶ 58. AGK advances three types of claims. Counts 1, 2, and 3 refer to Tranche 1, while counts 4, 5, and 6 refer to the three subsequent shipments, Tranche 2 and the airway bills. First, counts 1 and 4 contend that the parties had an oral contract, partially memorialized by certain faxes, that the defendants breached. 5 The parties had agreed that Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 6 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 the defendants would purchase all of the plaintiff's 2003 vanilla output. AGK repeats its earlier contention that Contract 11204 incorporated some of the parties' agreed- upon terms but unilaterally changed others, especially payment terms. AGK reiterates that the defendants had a duty to inspect and reject the vanilla promptly if it were defective. Compl. ¶¶ 60-63, 86-99. 5 The complaint does not mention ZTI in the counts praying for relief, instead referring mostly to “Defendants” and occasionally to “Zink and Triest” (what the Court has called ZTC). AGK acknowledged in its brief and at oral argument, however, that proving ZTI's liability may be necessary for some of its claims. Pl's Br. at 34-36; Tr. Oral Arg. at 38-39. Second, counts 2 and 5 claim that if Contract 11204 was a valid contract, then the defendants breached that contract. The defendants had a duty to inspect and reject the vanilla promptly if it were defective. Once they accepted the beans but refused to pay for them, the defendants converted the beans to their own use. If the beans were not defective on arrival but later became defective, then the defendants breached their duty by failing to store the vanilla properly and/or by unilaterally giving Coca-Cola extra time to test the product. If the beans were never defective, then AGK should not have had to bear the risk that Coca-Cola would reject the beans solely to get a better price elsewhere. The plaintiff emphasized at oral argument that it asserts that ZTC is directly liable to AGK as the consignee in Contract 11204. Compl. ¶¶ 67-71, 103-09; Tr. Oral Arg. at 21-22. Finally, counts 3 and 6 allege that, if the Court finds no contract, then the defendants have been unjustly enriched because AGK acquired a large amount of vanilla at the defendants' behest and as their purchasing agent, and the defendants retained the vanilla that AGK shipped. The defendants had a duty to inspect and reject the vanilla promptly if it were defective. Instead, they have retained the vanilla and have not paid for it. Compl. ¶¶ 75-82, 113-20. *5 On all counts, the plaintiff argues that the defendants should be treated as a single entity or ZTC's veil should be pierced to hold A .M. Todd and Todd liable. Compl. ¶¶ 64-65, 72-73, 83-84, 100-01, 110-11, 121-22. C. The Arbitration On March 10, 2005, AGK brought an arbitration proceeding against ZTI before the International Division of the American Arbitration Association (“AAA”) in New York, demanding more than $23.6 million in compensatory damages plus punitive damages. The arbitration complaint invoked the arbitration clause in Contract 11204: “[i]n the event of disputes Arbitration Rules of the American Arbitration Association in New York will apply.” ZTI brought a counterclaim for the $4.7 million that it had advanced to AGK, plus certain additional costs. Ex. A at cover page, 2, 62; Ex. B; Ex. MM at 9-10 . 6 6 Unless otherwise noted, references to lettered exhibits refer to exhibits to the defendants' motion. References to numbered exhibits refer to exhibits to the plaintiff's opposition. In early 2006, AGK attempted to join the defendants as respondents in the arbitration, arguing that ZTI's corporate veil should be pierced. ZTI opposed the joinder of these additional parties, arguing that the defendants were separate from ZTI and were not signatories to the contract. On July 6, 2006, the arbitrators issued a Partial Award denying AGK's request because joining new parties so late in the proceedings would unfairly deny those parties the opportunity to participate in choosing the arbitrators and the rules of the arbitration. The arbitrators explicitly did not rule on the merits of whether the arbitration panel would have jurisdiction over the defendants or on whether the corporate veil should be pierced to hold the defendants liable for ZTI's debts. The arbitrators did suggest that AGK could bring a separate arbitration proceeding against the defendants to resolve these issues. Ex. GG; Ex. HH; Ex. FF; Ex. OO. On February 2, 2007, the plaintiff sent a letter to the arbitration panel and to ZTI, stating that it had resolved to withdraw from the arbitration because it had discovered that ZTI was judgment-proof and a shell corporation. The letter states that Todd had contacted AGK urging it to drop the suit because ZTI had no assets. AGK also states that any judgment against ZTI will be unenforceable because ZTI no longer exists. In the face of AGK's withdrawal, ZTI dropped its counterclaim. The arbitrators terminated the arbitration proceeding on February 28, 2007. A final oral hearing had been scheduled for February 26, 2007. The parties agreed at oral argument that the termination was without prejudice. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 7 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Ex. W; Pl's Ex. 3 distributed at oral arg.; Ex. BB; Tr. Oral Arg. at 20-21, 43. D. The Defendants' Motion to Dismiss and the Plaintiff's Opposition In their motion to dismiss, the defendants argue that the Court should dismiss the plaintiff's complaint because: (1) AGK is judicially estopped from arguing that the arbitration clause does not govern the parties' transaction because AGK brought and for two years participated in arbitration; (2) the Court lacks subject matter jurisdiction because the arbitration clause is valid; (3) the complaint's allegations of veil-piercing are insufficient; and (4) venue is improper. In the alternative, the defendants argue that (5) the Court should stay these proceedings until AGK obtains an arbitration award against ZTI; (6) the Court should transfer these proceedings to the Southern District of New York; or (7) AGK should be required to plead more specifically. Def's Br. at 4. *6 The plaintiff opposes each of these positions, arguing that it may go forward with all of its claims. AGK argues that it is not estopped from pleading in the alternative and states that it may proceed against the defendants notwithstanding its prior arbitration against ZTI. It calls that arbitration a “mistake.” Pl's Br. at 29, 34. A few additional relevant facts came to light as part of the parties' motion papers. In particular, AGK provided documents that explain further why it withdrew from the arbitration proceeding. The defendants deny the conclusion that ZTI was, in fact, judgment-proof or a shell corporation at the relevant times. They do not dispute, however, that the following events occurred. After filing the arbitration, AGK's counsel, Eric Sossah, a French attorney, investigated ZTI's finances and corporate information. As a result of this investigation, which included traveling to Mauritius, Sossah concluded that ZTI was a “nameplate” company, with no physical presence apart from a corporate depository that provided a Mauritius mailing address. Aff. of Eric Sossah, Ex. 20, ¶¶ 8-16, 21. To substantiate its position that ZTI was judgment- proof by the time the arbitration terminated, the plaintiff submitted an e-mail from ZTI's counsel (also defense counsel here) to AGK's counsel stating that ZTI's “assets ... are dwindling rapidly and its cash balances are approaching absolute zero.” The exhibit does not appear to contain the date of the e-mail, but the plaintiff's brief represents that the e-mail was sent on November 29, 2006. Ex. 17. II. Discussion The Court's decision proceeds in seven parts, holding that: (1) the framework of the Federal Arbitration Act (“FAA”) applies to this case; (2) AGK has demonstrated its consent to arbitrate at least its claims against ZTI by bringing the AAA proceeding; (3) the defendants can enforce AGK's agreement to arbitrate against AGK; (4) because AGK's claims against ZTI are arbitrable, any claims that purport to pierce ZTI's veil are likewise arbitrable; (5) any claims that rely specifically on Contract 11204, whether pleading that it is the governing contract or that it memorializes some but not all of the parties' intentions, are arbitrable; (6) the plaintiff's claims for unjust enrichment and conversion, brought against the defendants directly, must be sent to arbitration because they plausibly relate to the subject matter of the agreement to arbitrate; and (7) the FAA requires the Court to stay the case. A. The Federal Arbitration Act The FAA, 9 U.S.C. §§ 1-16, governs all contracts that rely on a written arbitration clause and concern interstate or foreign commerce. 9 U.S.C. §§ 1, 2. If a court finds that a given dispute falls under a valid arbitration clause, then the court must stay court proceedings pending arbitration (9 U.S.C. § 3) and compel arbitration (9 U.S.C. § 4) if a party requests such relief. Under the FAA, questions of whether the parties formed an agreement to arbitrate at all are governed by state contract law. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). “Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (internal quotations omitted). The FAA mandates that the arbitration clause is valid and enforceable to the same extent that any other contractual provision would be. An arbitration clause cannot be invalidated except on the basis of generally applicable contract principles, such as fraud or unconscionability. 9 U.S.C. § 2; see also Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 8 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 (1996) (“By enacting § 2, ... Congress precluded States from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed upon the same footing as other contracts.” (internal quotations omitted)). 7 7 If the party challenges the arbitration clause in particular-not the contract as a whole-on the basis of such a principle, then the court can decide the clause's validity. In contrast, if the party challenges the contract as a whole on the basis of such a principle, then the court must not decide the question but must instead submit the issue to the arbitrator. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). *7 Once it is established that an arbitration clause exists and that the FAA applies, federal law governs the scope of an arbitration clause. The FAA embodies a liberal policy favoring arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Any ambiguity as to whether a particular grievance falls within the ambit of an arbitration clause must be resolved in favor of arbitration. AT & T, 475 U.S. at 650. “An order to arbitrate 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.” So long as a party's claim of arbitrability is “plausible,” an arbitrator, not a court, must interpret the contract. Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir.2001) (internal quotations omitted). The FAA applies to the present facts. The parties do not directly address whether the FAA applies. The plaintiff does not mention the FAA in its brief at all, while the defendants refer to it only in passing. The Court finds, however, that both FAA requirements have been met. First, the arbitration clause in Contract 11204 is written. The fact that Contract 11204 was never signed by AGK does not remove the contract from the FAA's ambit. The FAA does not require a signature. See Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir.1987). 8 Second, no one disputes that the transaction at issue is international, with the vanilla beans shipped from the Comoros to Philadelphia. 8 Where lawmakers have wished to indicate that a law applies only when the contract with the arbitration clause has been signed, they have done so explicitly. See Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 448-49 (3d Cir.2003) (holding that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been incorporated into U.S. law, is applicable only when both parties have signed a contract or series of letters agreeing to arbitration). B. AGK Agreed to Arbitrate Its Claims By Bringing the AAA Arbitration Ordinarily, the Court would engage in an inquiry into whether Contract 11204 satisfied the contract principles of offer, acceptance, meeting of the minds, and so forth. 9 AGK argues that it never agreed to arbitrate any disputes with ZTI or the defendants because it never agreed to Contract 11204. It does not argue that the arbitration clause specifically is invalid. Instead, it argues that it never agreed to several key terms in Contract 11204, that its shipment of the vanilla beans did not constitute acceptance of Contract 11204, and therefore that Contract 11204 did not represent the parties' true agreement. 9 The parties disagree about which state's law should apply, but neither points out a relevant difference between Pennsylvania law (favored by the plaintiff) and New York law (favored by the defendants). Both parties freely cite to federal cases applying federal law, as well. New York and Pennsylvania law both support the Court's ruling, which is based on generally applicable principles of consent and waiver. Therefore, the Court does not conduct a choice of law analysis. In this case, however, the Court need not conduct an inquiry into whether or not Contract 11204 was validly formed because AGK manifested its consent to arbitrate by bringing the AAA arbitration. Although a party usually indicates its intent to arbitrate by signing a contract that includes an arbitration clause, it can also indicate its consent by bringing and prosecuting an arbitration proceeding. A party may also waive any objection to arbitration by not raising it early enough. United Indus. Workers, Local No. 16 v. Gov't of the V.I., 987 F.2d 162 (3d Cir.1993). In United Industrial Workers, the United States Court of Appeals for the Third Circuit held that Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 9 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 by demanding arbitration and fully participating in arbitration, represented by counsel, the plaintiff union demonstrated its unmistakable intent to arbitrate the dispute. Id. at 168. The court went on to cite approvingly a case from the United States Court of Appeals for the Seventh Circuit that stated that “[t]he party initiating the arbitration has made a decision that the dispute is arbitrable.” Id. (citing Int'l Ass'n of Machinists & Aerospace Workers, Lodge No. 1777 v. Fansteel, Inc., 900 F.2d 1005, 1009 (7th Cir.1990)). The United Industrial Workers court noted that its decision to hold the union to the arbitration clause could also be understood as stating that the union had waived any right to object to arbitration. The court cited other circuits approvingly for the proposition that by submitting a matter to arbitration, a party waives the right to object to the arbitrability of a dispute. United Indus. Workers, 987 F.2d at 168-69. *8 This common sense principle finds support in both New York and Pennsylvania state law. In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Chan, 38 A.D.3d 355, 832 N.Y.S.2d 182, 183 (N.Y.App.Div.2007), the respondent challenged the results of an arbitration on the grounds that the arbitrator lacked authority to hear the case. The court rejected this challenge because the respondent had himself brought the arbitration proceeding. In Weinmann v. Meehan, 428 Pa.Super. 582, 631 A.2d 684 (Pa.Super.1993), the appellants argued that the arbitration award against them was invalid because they, as directors and not shareholders of the corporation at issue, did not fall within the relevant arbitration clause. Stating that “the parties by their conduct may assent to have a matter resolved by a particular tribunal,” the court held that the appellants could not challenge the arbitration because when the appellee had previously brought suit in court, the appellants had successfully argued that the matter was arbitrable. Id. at 686; cf. 42 Pa. Cons.Stat. § 7314(a)(1)(v) (in statutory arbitration scheme, the court shall vacate an arbitration award where there was no agreement to arbitrate, no court had previously stayed litigation or compelled arbitration, and the party asking the court to vacate the order had raised the issue of an agreement to arbitrate before the arbitrators). Having brought an arbitration proceeding against ZTI and prosecuted that action for two years, AGK has manifested its consent to arbitrate those claims. It is immaterial that the above cited cases, unlike the instant case, concern motions to vacate a final arbitration judgment. In all cases, the central question is whether the party opposing arbitration has already expressed its consent to arbitrate. The instant case squarely implicates the policy rationales behind United Industrial Workers, Merrill Lynch, and Weinmann, as well as an earlier, similar case, Teamsters Local Union No. 764 v. J.H. Merritt & Co., 770 F.2d 40, 42 (3d Cir.1985). To allow a party to bring arbitration, abandon it just before its conclusion-no matter for what reason-and then bring federal suit arguing that no valid arbitration clause existed would introduce unfair and inefficient incentives. AGK is therefore estopped from asserting that it did not agree to arbitrate. Alternatively formulated, AGK has waived any objection to arbitration on the grounds that it did not consent. Whether or not bringing the arbitration was a “mistake,” as AGK now states, is immaterial under the framework of United Industrial Workers. Instead, it is the act of bringing and prosecuting the arbitration- regardless of motivation-that manifests the plaintiff's consent to arbitration and therefore binds the plaintiff to arbitrate. The extraordinary remedy of judicial estoppel, in contrast, is not applicable here. Judicial estoppel is an equitable doctrine intended to protect the integrity of the judicial process by preventing parties from deliberately changing positions according to the exigencies of the moment. It should be applied only to prevent a miscarriage of justice, and the court must give the accused party a chance to explain the inconsistency in its positions. Krystal Cadillac- Oldsmobile GMC Truck, Inc. v. General Motors Corp., 337 F.3d 314, 319-20 (3d Cir.2003). *9 “[S]ome aggravating factor, and not mere inconsistency, is necessary for the application of judicial estoppel.” Chao v. Roy's Const., Inc., ---F.3d ----, 2008 WL 540245, at *11 n. 5 (3d Cir. Feb.29, 2008) (quoting New Hampshire v. Maine, 532 U.S. 742, 751, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001)) (internal quotations omitted). Several factors play a role in a court's determination of whether judicial estoppel is appropriate. First, a party's later position must be clearly inconsistent with its earlier position. Second, courts inquire whether the party has persuaded the earlier court to adopt that party's earlier position. Third, courts inquire whether the party seeking to assert the inconsistent position would gain Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 10 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 an unfair advantage if not estopped. The court may also consider other factors in balancing the equities, for instance, whether the initial position was a mistake. New Hampshire, 532 U.S. at 749-51, 753 (internal citations omitted); see also Montrose Med. Group Participating Savings Plan v. Bulger, 243 F.3d 773, 780-81 (3d Cir.2001). The United States Court of Appeals for the Third Circuit has held that the presence of bad faith is relevant to the court's determination. Krystal, 337 F.3d at 319-20. In view of these factors and on this record, the Court cannot find that AGK has abused the judicial process. The arbitration panel never adopted the claims to which the defendants seek here to bind the plaintiff. Although the arbitration panel issued interim rulings that may have accepted certain of the positions that the plaintiff took in that proceeding, the panel never reached the merits of AGK's claims against ZTI and therefore did not accept or adopt those theories of liability. C. The Defendants Can Enforce AGK's Agreement to Arbitrate Although they were not signatories to the arbitration agreement, the defendants can enforce the arbitration agreement against AGK. Under certain circumstances, a nonsignatory to an arbitration agreement can enforce that agreement against a signatory. 10 This is so despite the fact that arbitrability is a matter of contract, ordinarily resting on the agreement of the parties. 10 AGK protests that it is not a “signatory” because it never signed Contract 11204. The Court has found, however, that AGK consented to arbitrate by bringing the arbitration proceeding, so AGK is a signatory for purposes of this analysis, in that it is a party that directly agreed to arbitrate. The United States Court of Appeals for the Third Circuit has noted with approval that courts have bound a signatory to arbitrate with a nonsignatory “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.” E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 199-200 (3d Cir.2001) (internal quotations omitted). On this theory, the signatory is estopped from avoiding arbitration with a nonsignatory when the claims at issue rely on the terms of the agreement or assume the existence of, arise out of, or relate directly to, the written agreement. Bannett v. Hankin, 331 F.Supp.2d 354, 359-60 (E.D.Pa.2004) (citing Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir.2000); MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999); McBro Planning & Dev. Co. v. Triangle Elec. Const. Co., Inc., 741 F.2d 342 (11th Cir.1984); Domke on Commercial Arbitration § 13:8 (2003)). *10 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. Grigson, 210 F.3d at 527 (quoting MS Dealer, 177 F.3d at 947). Here, nearly all of the factual allegations supporting the plaintiff's claims are allegations that AGK would have had to have proven in the arbitration in order to prevail against ZTI. In particular, the allegations of wrong-doing are nearly identical. Only the allegations of the corporate relationships among the defendants and ZTI and of the identities of the parties that formed the contract would have been inapplicable to the arbitration proceeding. In fact, AGK attempted to put those relationships at issue even after the arbitration panel ruled against the joinder of the defendants. Ex. PP. The second test for applying estoppel is also satisfied. To the extent that ZTI has some existence separate from the defendants, AGK alleges “substantially interdependent and concerted misconduct” among ZTI and the defendants. This suit presents the unusual circumstances that the parties seeking to enforce the arbitration agreement have not conceded that the claims against them are arbitrable and that the subsidiary of those parties in fact argued in arbitration that those parties were not subject to the arbitration clause. These facts do not change the Court's conclusions that the plaintiff has agreed to arbitration and that the defendants have standing to enforce that agreement. They do, however, raise interesting issues for resolution in the first instance by the arbitration panel. The Court does not express any view as to any issues other than those decided here. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 11 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 D. AGK Cannot Sue on a Piercing the Veil Theory Without First Arbitrating ZTI's Liability The Court finds that if a party has an arbitration agreement with a subsidiary, that party cannot sue the subsidiary's parent in federal court on a piercing the veil theory without first obtaining an arbitration judgment that the subsidiary is liable. 11 As a result, all of the plaintiff's claims that rely on piercing ZTI's veil are arbitrable, in whatever counts of the complaint they appear. 11 To the extent that AGK is correct that ZTI has no separate corporate existence apart from the defendants, AGK could be said to be contending that its contractual partners were really the defendants all along. If that were so, then the defendants would be parties to Contract 11204 and therefore to the arbitration clause. When the plaintiff is obligated to arbitrate its disputes with a subsidiary, allowing the plaintiff to sue the parent directly would allow the plaintiff to bypass the requirement that arbitrators, not a court, rule on whether the subsidiary is liable. This outcome would frustrate the federal policy favoring arbitration. 12 12 Case law supports the analogous proposition that, in the interest of avoiding inconsistent legal determinations, a court may stay non-arbitrable claims against a parent so that arbitrable claims against the subsidiary may be arbitrated first. As the Supreme Court has stated, the trial court has discretion to issue a stay as to a litigant that is not a party to an arbitration agreement. Moses H. Cone, 460 U.S. at 21 n. 23. For instance, in Sam Reisfeld & Son Import Co. v. S.A. Eteco, 530 F.2d 679 (5th Cir.1976), the United States Court of Appeals for the Fifth Circuit held that where the charges against parent companies of the arbitrating party “were based on the same operative facts and were inherently inseparable from the claims against [the subsidiary],” the trial court had discretion to stay the claims against the parent pending arbitration against the subsidiary. As the court explained, “[i]f the parent corporation was forced to try the case, the arbitration proceedings would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted.” Id . at 681. The parties cite several cases in their briefs and in oral argument regarding whether a party can sue a parent under a piercing the veil theory before obtaining a judgment that the subsidiary is liable. These cases do not address the central issue at hand. There may be situations in which there is no arbitration clause and a plaintiff can pursue the parent directly on a piercing the veil theory, without first separately showing the subsidiary's liability. See, e.g., Brown v. Astro Holdings, Inc., 385 F.Supp.2d 519 (E.D.Pa.2005). None of the cases cited by the parties, however, concerned a situation in which the plaintiff was obligated to arbitrate its disputes with the subsidiary but brought suit only against the parent, and the Court has found no such cases. *11 The plaintiff protests that it would be unreasonable to expect it to proceed to judgment in an arbitration against a judgment-proof entity incorporated in an asset- protection jurisdiction. The Court disagrees. If AGK had won in arbitration against ZTI, it could then have sued the defendants on a piercing the veil theory to enforce that judgment. The parties could then have litigated the issue of whether that veil-piercing suit fell under the arbitration clause. If AGK had lost in arbitration against ZTI, AGK readily agrees that it would not be able to bring at least some of the claims alleged in the instant suit. Tr. Oral Arg. at 18, 38, 40-41. The arbitrators themselves suggested a potential solution to AGK's claim that it should not be forced to pursue arbitration against ZTI without any prospect of being able to hold a non-judgment-proof entity liable. In their decision denying AGK's request to join the defendants as respondents in the arbitration, the arbitrators contemplated that a separate arbitration panel could have determined whether or not any claims by AGK against the defendants were arbitrable. Ex. OO ¶ 23; Tr. Oral Arg. at 31. E. The Plaintiff Must Arbitrate All Claims That Rely on Contract 11204 Based on a similar analysis, any claims that rest on or require interpreting Contract 11204 are also arbitrable. Once a court has determined that an agreement to arbitrate exists, it should find a particular dispute arbitrable “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Medtronic, 247 F.3d at 55 (internal quotations omitted). A party's claim that a particular dispute is arbitrable Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 12 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 need be only “plausible” for the court to hold that an arbitrator should decide the question. Id. Moreover, in determining whether a claim falls within the scope of the arbitration agreement, the Court must focus on “the factual underpinnings of the claim rather than the legal theory alleged in the complaint.” Id. The Court must give effect to the arbitration clause's breadth. The contract reads: “[i]n the event of disputes Arbitration Rules of the American Arbitration Association in New York will apply.” This clause is not fatally ambiguous, as the plaintiff urges. This is a broad arbitration clause, at least plausibly encompassing all disputes that relate to the subject matter of the contract. The plaintiff argues that ZTC is directly liable under Contract 11204 as the named consignee in that contract. Arbitration is mandatory for those claims. If the plaintiff is going to rely on Contract 11204 for recovery, then it cannot avoid the enforcement of the arbitration clause that Contract 11204 contains. The plaintiff's direct contract claims, counts 2 and 5, must therefore be arbitrated. 13 13 The plaintiff urges that its complaint includes the non- contract claim of conversion. Although there is no separate count of conversion, the plaintiff uses the term “converted” in counts 2, 4, and 5. Compl. ¶¶ 69, 91, 97, 107. To the extent that these counts articulate non-contract conversion claims, the Court's analysis in Section II.F. below applies. Counts 1 and 4 allege that the plaintiff had an oral contract with the defendants. In count 1, which concerns Tranche 1, the plaintiff alleges that “ ‘Contract’ 11204 ... incorporates some of the parties['] agreement on terms ..., while unilaterally changing other terms ....” The plaintiff makes a similar allegation with respect to Tranche 2 in count 4. The plaintiff also alleges that the parties had agreed to treat the airway bills the same as Tranche 2 and that the plaintiff would sell the defendants its entire 2003 vanilla output. Because both counts 1 and 4 require adjudication of the meaning of Contract 11204 and to what extent its terms reflected the parties' intentions, these counts must be arbitrated. Compl. ¶¶ 60, 87, 22, 86. F. The Plaintiff Must Arbitrate All Claims Related to the Subject Matter of Contract 11204 *12 The Court concludes that the scope of the plaintiff's consent to arbitrate is broad enough to encompass all of its claims, including the unjust enrichment claims in counts 3 and 6. The plaintiff argues that because counts 3 and 6 articulate a completely non-contract claim against the defendants, they should not be affected by AGK's previous arbitration against ZTI. In particular, AGK urges that the defendants are liable directly, not through ZTI, for keeping the vanilla beans rather than returning them to AGK. Because Contract 11204 purports to set forth the terms under which AGK shipped the vanilla, however, these claims, too, must be submitted to an arbitrator. Under Medtronic, the factual allegations on which a claim rests, not the claim's legal label, determine whether the claim is arbitrable. Medtronic, 247 F.3d at 55; cf. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. ., 473 U.S. 614, 625 n. 13, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ( “[I]nsofar as the allegations underlying the statutory claims touch matters covered by the enumerated articles, the Court of Appeals properly resolved any doubts in favor of arbitrability.”). Where separate tort claims arise out of the same facts as the breach of contract claim, a broadly worded arbitration provision covers such claims. Although the United States Court of Appeals for the Third Circuit does not appear to have addressed this particular aspect of the scope of an arbitration clause, other courts have held unjust enrichment and conversion claims to be arbitrable. See, e.g., U.S. Claims, Inc. v. Saffren & Weinberg, LLP, Civ. No. 07-0543, 2007 WL 4225536, at *7 (E.D.Pa. Nov.29, 2007); RCM Techs., Inc. v. Brignik Tech., Inc., 137 F.Supp.2d 550, 556 (D.N.J.2001); cf. Brayman Const. Corp. v. Home Ins. Co., 319 F.3d 622, 625-26 (3d Cir.2003). G. The Court Will Stay the Case The defendant moves for this Court to dismiss the case, or in the alternative to stay proceedings pending arbitration. The Court will stay the case. Under the FAA, if a suit is brought on an issue “referable to arbitration under an agreement in writing for such arbitration,” then “the court ... 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 13 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U.S.C. § 3. The United States Court of Appeals for the Third Circuit has held that the FAA leaves no discretion to dismiss a fully arbitrable case instead of granting a stay, if a party has requested a stay. Lloyd v. Hovensa, LLC, 369 F.3d 263, 269 (3d Cir.2004). 14 As the Lloyd court notes, even where all claims in a case are arbitrable, a district court retains many roles, including the ability to confirm, vacate, or modify the ultimate arbitration order. Id. at 270 (citing FAA, 9 U.S.C. §§ 9-11); see also Cortez Byrd Chips, Inc. v. Bill Harbert Const. Co., 529 U.S. 193, 201-02, 120 S.Ct. 1331, 146 L.Ed.2d 171 (2000) (stating that any court with the power to stay a suit pending arbitration would have the power to confirm, vacate, or deny any ultimate arbitration award, regardless of whether the arbitration occurred in that court's district). 14 The defendants are not in default in proceeding with arbitration. “Default” for the purpose of § 3 is generally treated as synonymous with having waived the right to arbitrate by actively litigating the case in court. Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 217-18 (3d Cir.2007). *13 Lloyd concerned a case in which a party moved for a stay, but the district court instead dismissed the case. Here, the defendants would prefer a dismissal, but have moved for a stay in the alternative. The question arises whether this factor would allow the court to dismiss instead of staying the case. District courts in this circuit have uniformly held post-Lloyd that when a litigant moves for a stay even as part of a motion in the alternative, Lloyd 's mandate applies. See, e.g., Bloom v. Jersey City Mun. Utils. Auth., No. 06-CV-3526, 2008 WL 360986, at *6 (D.N.J. Feb. 8, 2008) (ruling on motions for summary judgment, motions to dismiss, and a motion to stay by only one of multiple defendants, the court has no choice but to stay); U.S. Claims, 2007 WL 4225536, at *14 (ruling on a motion to dismiss or in the alternative to stay the suit, the court has no choice but to stay); Griffen v. Alpha Phi Alpha, Inc., No. Civ. A. 06-1735, 2007 WL 707364, at *9 (E.D.Pa. Mar.2, 2007) (same). On the other hand, when a party has moved for a dismissal but has not moved for a stay, some courts have ruled that Lloyd does not apply and therefore that a dismissal is available if all claims in the suit are arbitrable. See, e.g., Rhodia Inc. v. Bayer Cropscience Inc., No. Civ. 04-6424, 2007 WL 3349453, at *5 (D.N.J. Nov.7, 2007). 15 15 If a party that is not subject to arbitration applies for a stay, the court has the discretion but not the obligation to stay the litigation as to that party, in order to allow other claims in a suit to go to arbitration first. See Moses H. Cone, 460 U.S. at 21 n. 23. This Court has ruled that the defendants can enforce the arbitration agreement against the plaintiff even though they are not signatories to the arbitration agreement. This principle, therefore, does not apply here. The Court need not decide whether a stay is mandatory here because even if a stay were not mandatory under the FAA, the Court would exercise its discretion to stay the case pending arbitration because the Court retains many roles in connection with an arbitration. Even if some but not all of the claims in this case were arbitrable, the Court would stay the entire case pending arbitration because the factual bases for all of the claims are so intertwined with one another. The fact that arbitration was previously commenced but never concluded does not change the Court's finding that a stay is warranted. 16 16 The Supreme Court encountered a case in which arbitration proceedings had been suspended in Mitsubishi Motors, 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444, in which the Court found the dispute in question arbitrable. The district court had stayed its own proceedings pending arbitration in Japan that subsequently halted when one party filed for bankruptcy. Id. at 623 n. 12. The question of how the district court should handle the stay in the face of the halted arbitration proceedings was not, however, before the Supreme Court. The Court does not reach the defendants' other arguments in support of its motion to dismiss. An appropriate Order follows. ORDER AND NOW, this 18th day of March, 2008, upon consideration of the defendants' Motion to Dismiss, or in the Alternative to Change Venue (Docket No. 12), Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 14 of 136 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 the plaintiff's opposition thereto, the defendants' reply thereto, and the parties' supplemental submissions, and following oral argument held on November 1, 2007, IT IS HEREBY ORDERED that the motion to dismiss or stay is GRANTED, and that the motion to change venue is DENIED as MOOT, for the reasons stated in the accompanying memorandum. IT IS FURTHER ORDERED that these proceedings are STAYED until further notice by the Court. The parties shall report back to the Court within 90 days of the entry of this Order as to the status of this matter. All Citations Not Reported in F.Supp.2d, 2008 WL 724607 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 15 of 136 B Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 16 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 3952945 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. Patricia BOOTH v. BMO HARRIS BANK, N.A., et al. Civil Action No. 13–5968. | Signed Aug. 11, 2014. Attorneys and Law Firms Hassan A. Zavareei, Tycko & Zavareei LLP, Washington, DC, Jeffrey M. Ostrow, Kopelowitz Ostro PA, Ft Lauderdale, FL, John Austin Moore, Steve Six, Stueve Siegel Hanson LLP, Kansas City, MO, Natalie Finkelman Bennett, James C. Shah, Shepherd Finkelman Miller & Shah LLC, Media, PA, for Patricia Booth. Debra Bogo-Ernst, Lucia Nale, Mayer Brown LLP, Chicago, IL, Lisa C. Wood, Marc C. Singer, Saiber, LLC, Florham Park, NJ, Elizabeth Balassone, James R. McGuire, Rita F. Lin, Morrison & Foerster LLP, San Francisco, CA, Marc Durant, Durant & Durant, James T. Moughan, Britt, Hankins & Moughan, Philadelphia, PA, Todd A. Noteboom, Minneapolis, MN, for BMO Harris Bank, N.A., et al. MEMORANDUM SURRICK, District Judge. *1 Presently before the Court is Defendant First International Bank & Trust's Motion to Compel Arbitration (ECF No. 34), Defendant BMO Harris Bank, N.A.'s Motion to Compel Arbitration (ECF No. 40), and Defendant North American Banking Company's Motion to Compel Arbitration (ECF No. 46). For the following reasons, Defendants' Motions will be granted. I. BACKGROUND Plaintiff allegedly obtained three “payday” loans at usurious rates from three online lenders. (See Compl., ECF No. 1.) A payday loan is a small, high fee, short- term loan traditionally made to consumers in anticipation of an upcoming paycheck. (Id. at ¶ 23.) In this case, the payday loans had interest rates of 30%. (Id. at ¶¶ 79, 83.) To obtain a payday loan, a borrower must provide the lender with security for the loan amount by giving the lender a personal check or authorizing the lender to electronically debit the borrower's account. (Id.) On May 30, 2013, Plaintiff obtained a payday loan from One Click Cash by completing an online application. (Id. at ¶ 82.) As part of the transaction, Plaintiff authorized One Click Cash to debit her checking account with Wells Fargo to repay the loan. (Id.) One Click Cash initiated a debit transaction on July 5, 2013. (Id. at ¶ 85.) Plaintiff obtained a second payday loan on July 10, 2013, this time from a different online lender, My Cash Advance, and she again authorized the lender to debit her checking account. (Id. at ¶ 78.) My Cash Advance debited Plaintiff's checking account on July 19, 2013. (Id. at ¶ 81.) Finally, on July 24, 2013, Plaintiff obtained a third payday loan from a third lender, Plain Green. (Id. at ¶ 74.) Plaintiff authorized Plain Green to debit her checking account, and Plain Green initiated a debit transaction on August 2, 2013. (Id. at ¶ 77.) To electronically deposit the loan proceeds and then to initiate the debit transactions of Plaintiff's checking account for repayments, One Click Cash, My Cash Advance, and Plain Green (collectively the “Lenders”) needed access to the Automated Clearing House (“ACH”) Network. (Id. at ¶ 6–7.) 1 The Defendants here are Originating Depository Financial Institutes (“ODFIs”) that are members of and have access to the ACH Network. (Compl. at ¶ 6.) For a fee, Defendants allegedly provided the Lenders with the access they needed to the ACH Network by “originating” the debits and credits on the payday loans. (Id.) Specifically, First International Bank & Trust (“FIB”) originated transactions in connection with the May 30 loan from One Click Cash; BMO Harris Bank, N.A. (“BMO”) originated transactions in connection with the July 10 loan from My Cash Advance; and North American Banking Company (“NABC”) originated transactions in connection with the July 24 loan from Plain Green. (Id. at ¶ ¶ 77, 81, 85.) Plaintiff claims that by providing the Lenders access to the ACH Network, Defendants violated the Racketeering Influenced and Corrupt Organization Act (“RICO”) by knowingly participating in an enterprise's affairs through “collection of unlawful debt.” Defendants allegedly knew that the Lenders were loaning at usurious rates but still allowed them to access the ACH Network. In addition, Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 17 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Plaintiff alleges that Defendants each conspired with the Lenders to violate RICO. Lastly, Plaintiff claims that each Defendant violated various Pennsylvania state laws. 1 The ACH Network is a processing system in which financial institutions accumulate ACH transactions throughout the day for later batch processing. The ACH transactions are the credits and debits of funds from a financial account necessary for an exchange between two parties. (Compl.¶ 31.) *2 When Plaintiff obtained each of her payday loans, she signed loan agreements with the Lender that provided the loan (collectively “Loan Agreements”). 2 All the Loan Agreements contain arbitration provisions. First, the loan application and loan agreement with One Click Cash contains the following arbitration provision: 2 Although Plaintiff did not attach the Loan Agreements to the Complaint, Defendants provided them as exhibits attached to declarations that were made by individuals who had access to the Lender's records of customer loan agreements. We can consider these documents at this stage because they are integral to and explicitly relied upon in the Complaint: Plaintiff references the terms of the Loan Agreements throughout the Complaint and cites to Defendants' exhibits throughout her oppositions. In re: Burlington Coat Factory Securities Litig., 114 F.3d 1410, 1426 (3d Cir.1997) (stating documents that are integral to or explicitly relied upon in the complaint may be considered on a motion to dismiss without converting the motion into one for summary judgment). In addition, Plaintiff does not challenge the “validity and scope” of the arbitration provisions in the Loan Agreements. (Pl.'s FIB Resp.5–6; Pl.'s BMO Resp. 5; Pl.'s NABC Resp. 5) “We” or “Us” are SFS, Inc. dba OneClickCash and its directors, officers, employees, authorized representatives, agents and successors in interest acting within the scope of their authority. .... If any dispute arises that We cannot resolve to your satisfaction, You and We hereby agree that we shall arbitrate that dispute in accordance with the terms of this Arbitration Provision. .... The word “dispute” and “disputes” are given the broadest possible meaning and include, without limitation and whether past, present or future: (a) all claims, disputes or controversies arising from or relating directly or indirectly to the signing of this Loan Agreement, including the validity and scope of this Arbitration Provision, or any claim, dispute, or controversy relating to the interpretation, applicability, enforceability or formation of this Loan Agreement, including, but not limited to any claim that all or any part of this Loan Agreement or this Arbitration Provision is void, voidable, invalid or unenforceable; (b) all federal or state law claims arising from or relating directly or indirectly to this Loan agreement ...; (c) all counterclaims, cross-claims and third party claims; (d) all common law claims, based upon contract, tort, fraud, or other intentional torts; (e) all claims based upon a violation of any state or federal constitution, statute or regulation ...; (g) all claims asserted by You individually against Us, and/or any of our agents, consultants, or servicers and/or any of their employees, directors, officers, shareholders, managers, members, parents, subsidiaries, or any affiliated entities (hereinafter collectively referred to as “related third parties” ) ... (One Click Cash Agmt., Lin Decl. Ex. 1A, ECF No. 35 (emphasis added).) FIB originated the transactions related to the One Click Cash Loan Agreement. Next, the loan agreement with My Cash Advance similarly reads: [T]he words “dispute and “disputes” are given the broadest possible meaning and include without limitations (a) all claims, disputes, or controversies arising from or relating directly or indirectly to the signing of this Arbitration Provision, the validity and scope of this Arbitration Provision and any claim or attempt to set aside this Arbitration Provision; (b) all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to the Loan Agreement ... (c) all counterclaims, cross- claims and third-party claims; (d) all common law claims, based upon contract, tort, fraud, or other intentional torts; ... (g) all claims asserted by You individually against Us and/or any of Our employees, agents, directors, officers, shareholders, governors, managers, members, parents company or affiliated Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 18 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 entities (hereinafter collectively referred to as “related third parties”) ... (emphasis added) *3 .... YOU AND WE WOULD HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE DISPUTES THROUGH A COURT AND HAVE A JUDGE OR JURY DECIDE THE DISPUTES BUT HAVE AGREED INSTEAD TO RESOLVE DISPUTES THROUGH BINDING ARBITRATION. (emphasis in original) (My Cash Advance Agmt., Raines Decl. Ex. 5, ECF No. 41.) BMO originated the transactions related to the My Cash Advance Agreement. Finally, the loan agreement with Plain Green reads: You and we ... agree that any Dispute ... will be resolved by Arbitration. .... [T]he terms “we,” “our,” and “us” mean Lender, Lender's affiliated companies, the Tribe, Lender's servicing and collection representatives and agents, and each of their respective agents, representatives, employees, officers, directors, members, managers, attorney, successors, predecessors, and assigns. .... [T]he term Dispute is to be given its broadest possible meaning and includes, without limitation, all claims or demands (whether past, present, or future) ... based on any legal or equitable theory (contract, tort, or otherwise) and regardless of the type of relief sought.... A Dispute includes by way of example and without limitation, any claim based upon tribal, federal or state constitution, statute, ordinance, regulation, or common law, and any issue concerning the validity, enforceability, or scope of this Agreement or this Agreement to Arbitrate. (Plain Green Agmt., Schwingler Decl. Ex. 1, ECF No. 46 (emphasis added).) NABC originated the transactions related to the Plain Green Agreement. Defendants have each filed a Motion to Compel Arbitration under the above arbitration provisions. FIB's Motion was filed on December 11, 2013 (FIB's Mot., ECF No. 34), BMO's Motion was filed on December 13, 2013 (BMO's Mot., ECF No. 40), and NABC's Motion was filed on December 24, 2013 (NABC's Mot., ECF No. 46). Plaintiff responded to FIB's Motion on January 21, 2014 (Pl.'s Resp. FIB, ECF No. 50) and to BMO's Motion and NABC's Motion on January 30, 2014 (Pl.'s Resp. BMO, ECF No. 53; Pl.'s Resp. NABC, ECF No. 54). On February 2, 2014, FIB filed a Reply. (FIB's Reply, ECF No. 56.) On February 20, 2014, BMO and NABC also filed Replies. (BMO Reply, ECF No. 62; NABC's Reply, ECF No. 58.) The parties have continued to file notices of supplemental authority. II. LEGAL STANDARD The applicable legal standard for a motion to compel arbitration depends upon the facts and circumstances of the case. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 776 (3d Cir.2013). “[W]hen it is apparent, based on the face of a 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.” Id.; Somerset Consulting, LLC v. United Capital Lenders, LLC, 832 F.Supp.2d 474, 482 (E.D.Pa.2011). Here, the Loan Applications indicate that Plaintiff agreed to arbitrate disputes with the Lenders. Plaintiff does not contest the validity of the arbitration provisions in the Loan Applications. Rather, she claims that Defendants cannot enforce the arbitration provisions. The Rule 12(b)(6) standard is appropriate. *4 Under this standard, the District Court must “accept all factual allegations in the complaint as true and give the pleader the benefit of all reasonable inferences that can be fairly drawn therefrom.” Fed.R.Civ.P. 12(b)(6). The court cannot accept conclusory allegations. Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir.2009). Viewing the facts in this light, a motion to compel arbitration will be granted “only where there is no genuine issue of fact concerning the formation of the agreement to arbitrate .” Kirleis v. Dickie, McCamey & Chilcote, P. C., 560 F.3d 156, 159 (3d Cir.2009) (internal quotation marks omitted). III. DISCUSSION Pursuant to the Federal Arbitration Act (“FAA”), arbitration clauses in contracts that involve commerce are “valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. This establishes a strong Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 19 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 federal policy favoring arbitration. Moses H. Cone Mem ‘l Hosp. v. Mercy Constr. Corp, 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). However, a dispute is not automatically submitted to arbitration upon the demand of a party to the dispute. Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 523 (3d Cir.2009). First, a court must determine that there is an agreement to arbitrate. Id. “Because an arbitrator's authority derives solely from the parties' agreement to submit their disputes to arbitration, a party cannot be compelled to submit a dispute to arbitration unless it has agreed to do so.” Invista S.a.r.l. v. Rhodia, S.A., 625 F.3d 75, 84 (3d Cir.2010) (quotation omitted); see also Guidotti, 716 F.3d at 771. Here, Plaintiff did not contract with Defendants but with the Lenders who are not parties to this action. However, this does not mean Defendants cannot enforce the arbitration provisions in the Loan Agreements because “non-signatories may be bound to arbitration agreements under certain very limited circumstances.” Rhodia, 625 F.3d at 84. There are five theories upon which non-signatories can be bound: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/ alter ego; and (5) estoppel. Id. Defendants argue that agency and estoppel are applicable to this case. In addition, Defendants argue that they can enforce the arbitration provisions as third-party beneficiaries to the Loan Agreements. Plaintiff responds that the arbitration provisions should not be enforced because the Loan Agreements are illegal and Defendants have unclean hands. 3 3 FIB and NABC argue that based on the language of the Loan Agreements, the issue of arbitrability should be decided by an arbitrator. “The Court will not assume that a party has agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that it did so.” Sarl v. A.M. Todd Co., No. 07–2727, 2009 WL 2526432, at *4 (E.D.Pa. Aug.18, 2009) (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83–84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002)). Here, there is no agreement between Plaintiff and Defendants, and Defendants as “non- signator[ies] cannot be bound to arbitrate unless [they are] bound under traditional principles of contract and agency law to be akin to a signatory of the underlying agreement.” Rhodia, 625 F.3d at 84. Therefore, even if the issue of arbitrability must be submitted to the arbitrator under the language of the Loan Agreements, we still must first determine whether Defendants are bound by and can enforce the arbitration provisions. See Aluminium Bahrain B.S.C. v. Dahdaleh,–F. Supp.2d-, No. 8–299, 2014 WL 1681494, at *8 (W.D.Pa. Apr.28, 2014) (determining whether non-signatory could enforce arbitration agreement before determining whether the parties agreed to arbitrate arbitrability). A. Equitable Estoppel 4 4 Plaintiff claims that under Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009), “[a] non-signatory to an arbitration agreement can only compel parties to arbitrate under the FAA when ‘the relevant state contract law allows him to enforce the agreement.’ ” (Pl.'s Resp. FIB 19; Pl.'s Resp. BMO 15; Pl.'s Resp. NABC 16 (all quoting Arthur Andersen, 556 U.S. at 632).) Plaintiff claims that the relevant contract law here is the law of the tribal nations where the Lenders are based, as set out in the choice of law provisions of the Loan Agreements. Yet, Plaintiff does not claim there is a conflict between Pennsylvania law and the applicable tribal law. Instead, she argues that Defendants' estoppel argument fails because Defendants have not established whether estoppel is available under the applicable tribal law. Plaintiff's argument is misguided. The choice-of-law question is relevant only to the extent that the foreign law conflicts with the law of the forum. Berg Chilling Sys., v. Hall Corp., 435 F.3d 455, 462 (3d Cir.2006) (“According to conflicts of laws principles, where the laws of the two jurisdictions would produce the same result on the particular issue presented, there is a ‘false conflict,’ and the Court should avoid the choice-of- law question.” (citations omitted)). And when foreign law is at issue, “it is incumbent upon the parties to carry both the burden of raising the issue that foreign law may apply in an action, and the burden of adequately proving foreign law to enable the court to apply it in a particular case.” Mzamane v. Winfrey, 693 F.Supp.2d 442, 469 (E.D.Pa.2010) (citing Bel– Ray Co., Inc. v. Chemrite Ltd., 181 F.3d 435, 440 (3d Cir.1999)). When the parties do not satisfy these burdens, the law of the forum applies. Id.; see also Walter v. Neth. Mead N.V., 514 F.2d 1130, 1137 n. 14 (3d Cir.1975) (concluding that although the law of the Netherlands ostensibly applied, where a party did not conclusively establish the foreign law, the court should assume it is consistent with the law of the forum). Plaintiff has not alleged that any true conflict exists, and according to FIB and NACB, no Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 20 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 conflict does exist because the applicable tribal law allows estoppel. In addition, FIB and BMO state that the FAA-not tribal law-applies to the arbitration provisions in the One Click Cash and My Cash Advance Loan Agreements. It is clear that the parties have not carried their burden of proving the tribal law such that we can apply here. We therefore will apply Pennsylvania law to the extent that it, and not the FAA, is applicable. We note that this outcome is consistent with the parties' submissions to this Court. Although Plaintiff appears to be making a choice-of-law argument, all of Plaintiff's claims and arguments in opposition to Defendants' Motions other than the choice-of-law argument assume that Pennsylvania law applies. Defendants also agreed to the application of Pennsylvania law. Thus, it appears that the parties have agreed that Pennsylvania law applies. We will not disturb that agreement. See USA Mach. Corp. v. CSC, Ltd., 184 F.3d 257, 263 (3d Cir.1999) (assuming without deciding that Pennsylvania law governed diversity suit where parties agreed on choice of law). There are two theories of equitable estoppel that can bind a non-signatory to an arbitration clause. E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 199 (3d Cir.2001). First, “[e]stoppel can bind a nonsignatory to an arbitration clause when that non-signatory has reaped the benefits of a contract containing an arbitration clause.” Rhodia, 625 F.3d at 85. The purpose of this is to “prevent a non-signatory from embracing a contract, and then turning its back on the portions of the contract, such as an arbitration clause, that it finds distasteful.” Peltz ex rel. Estate of Peltz v. Sears Roe Buck, 367 F.Supp.2d 711, 719 (E.D.Pa.2005). Second, equitable estoppel applies to bind a signatory to arbitrate with a non-signatory at the nonsignatory's insistence when there is: (1) a “close relationship between the entities involved[;]” and (2) “[a] relationship [between] the alleged wrongs [and] the nonsignatory's obligations and duties in the contract[.]” E.I. DuPont de Nemours & Co., 269 F.3d at 199. “To satisfy the second part of the test, the non-signatory seeking enforcement of an arbitration agreement must show that the claims against them are ‘intimately founded in and intertwined with’ the underlying obligations of the contract to which they were not a party. Miron v. BDO Seidman, LLP, 342 F.Supp.2d 324, 333 (E.D.Pa.2004) (quoting E.I. DuPont de Nemours & Co., 269 F.3d at 199). The second theory of equitable estoppel applies to this case. 1. Close Relationship Between the Entities *5 Determining whether a close relationship exists between the entities involved requires “examin[ing] the relationship of the alleged wrong to the nonsignatory's obligations and duties in the contract.” Miron, 342 F.Supp.2d at 333 (internal citations omitted). “[N]on- signatories ... can enforce an [arbitration] agreement when there is an obvious and close nexus between nonsignatories and the contract or the contract parties” such that it “is the signing parties' intent” to hold that party to the arbitration provision. Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa.Super.Ct.2006). Here, a close relationship exists between Defendants, the parties to the Loan Agreements, and the Loan Agreements themselves because Defendants' role in processing the debits and credits related to Plaintiff's loans was set out in the Loan Agreements, and Plaintiff agreed to arbitrate disputes with parties other than the Lender. In both the One Click Cash and Plain Green Agreements, Plaintiff agreed to provisions authorizing the Lender's “agents” or other listed types of third-parties to debit Plaintiff's bank account through the ACH Network for re-payment of her loans. The One Click Cash Agreement listed “authorized representatives,” and the Plain Green Agreement listed “representatives” and “affiliates.” The language of the Loan Agreements reveals that Plaintiff also consented to arbitrate with not only the signatory Lenders, but also related parties. Specifically, under the One Click Cash Loan Agreement, Plaintiff agreed to arbitrate all claims against One Click Cash's “agents,” “servicers,” or “affiliated entities.” (One Click Cash Agmt.) Similarly, Plaintiff agreed to arbitrate any dispute with Plain Green's “servicing and collection representatives and agents” under the Plain Green Loan Agreement. (Plain Green Agmt.) Having agreed to arbitrate with undefined agents and servicers or servicing representatives, and likewise having agreed that agents and third-parties, such as representatives, could perform the ACH transactions related to the Loan Agreements, it would be inequitable for Plaintiff to avoid arbitration with those same agents and third-parties that obviously have a nexus to Plaintiff and the Loan Agreements. FIB and NABC originated the ACH transactions that were referenced and anticipated by the Loan Agreements, which were integral to the functioning of the loan. Therefore, FIB and NABC are closely related to the entities involved such that the parties intended for Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 21 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 claims against them to fall within the scope of the arbitration provisions. Indeed, other courts on similar facts have found a sufficiently close relationship to compel arbitration under an estoppel theory. See Riley v. BMO Harris Bank, N.A., No. 13–1677, 2014 WL 3725341, at *6 (D.D.C. July 29, 2014); Graham v. BMO Harris Bank, N.A., No. 13–1460 (D.Conn. July 16, 2014); Moss v. BMO Harris Bank, N.A., No. 13–5438, 2014 WL 2565824, at *5– 6 (E.D.N.Y. June 9, 2014). In each of these cases, banks that processed ACH transactions for payday lenders were found to be intimately connected to the signatory plaintiffs who entered into broad arbitration agreements with the payday lenders. The signatory plaintiffs were not permitted to deny the foreseeability of having to arbitrate with the banks. *6 The same result is warranted with regard to BMO. The My Cash Advance Loan Agreement contains an ACH Authorization whereby Plaintiff authorized My Cash Advance and any “assignee” to initiate electronic fund transfers from Plaintiff's account. The ACH Authorization also refers to the “network.” While this is a narrower ACH authorization than the other Loan Agreements, the authorization still suggests that the debit could be performed by a third party. In addition, the My Cash Advance Loan Agreement contains a broad arbitration provision, providing for arbitration of disputes asserted against “agents” of My Cash Advance or “affiliated entities.” (My Cash Advance Agmt.) The combined effect of these provisions again creates an obvious close nexus between BMO and the parties to the Loan Agreement, such that the parties intended to hold BMO to the arbitration agreement. BMO originated the ACH debits anticipated in the Loan Agreement, and the parties to the Loan Agreement-by agreeing to arbitrate with affiliated entities-agreed to arbitrate with an undefined, expansive class of entities conducting business with My Cash Advance. Defendants have established that a close relationship exists. They should be permitted to enforce the arbitration provisions in the Loan Agreements. 2. Claims Intertwined with Contract Obligations 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.” Sarl v. A.M. Todd Co., No. 07–2727, 2008 WL 724607, *9 (E.D.Pa. Mar.18, 2008). Here, all of Plaintiff's claims rely on the terms of the Loan Agreements being illegal because of allegedly usurious interest rates. Each claim is premised on the idea that Defendants, by giving the Lenders access to the ACH Network to originate debits and credits related to the Loan Agreements, were involved in the collection of unlawful debts. Thus, the natural conclusion is that Plaintiff's claims are intertwined with the Loan Agreements that contain both the usurious interest rates and the arbitration provisions. Bannett v. Rankin, 331 F.Supp.2d 354, 360 (E.D.Pa.2004) (finding the defendants had standing to compel arbitration “[b]ecause all of [the][p]laintiff's claims make reference to or presume the existence of the partnership agreements and relate directly to those agreements”); see also Sarl, 2008 WL 724607, at *9–10 (E.D.Pa. Mar.18, 2008) (finding that the plaintiffs were estopped from avoiding arbitration because claim that non-signatory breached the contract relied upon the contract). Plaintiff argues that her claims are not “intertwined” with the Loan Agreements because she has not alleged that Defendants violated duties or obligations under the Loan Agreement. Plaintiff's argument is misguided. The relevant question is whether the claims at issue rely or depend on the terms of the agreement. Bannett, 331 F.Supp.2d at 360; Miron, 342 F.Supp.2d at 333 (“The plaintiff's actual dependence on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.” (emphasis in original) (quotations omitted)). Contrary to Plaintiff's assertion, her claims do actually depend on the Loan Agreements: her statutory and common law claims specifically rely on the terms of the Loan Agreements being illegal. *7 Further evidence of this dependence is found in Plaintiff's allegations of concerted misconduct between Defendants and the Lenders. See Sarl, 2008 WL 724607, at * 10 (quoting Grigson v. Creative Artist Agency L.L. C., 210 F.3 d 524, 527 (5th Cir.2000) (“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.”)). Plaintiff alleges interdependent and concerted conduct by Defendants and the Lenders through the use of their roles in the ACH Network “to facilitate payday loans.” (See Compl. ¶¶ 107, 124, 141.) More importantly, the Loan Agreements were central to the goal of Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 22 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 the alleged conspiracy: without the Loan Agreements, Defendants would not have loans to facilitate. Because Plaintiff's entire case depends on the contents of the loan agreements, which Defendants allegedly knew about, we find that the claims are sufficiently intertwined with the Loan Agreements. 5 Consequently, Plaintiffs are equitably estopped from disclaiming Defendants' right to enforce the arbitration provisions in the Loan Agreements. 6 5 As noted above, courts in other jurisdictions facing nearly identical facts to those before us have found the plaintiffs to be equitably estopped from denying similar arbitration provisions. Those courts found the loan agreements to be intertwined with the plaintiffs' claims. Those cases are persuasive. Riley, 2014 WL 3725341, at *5; Graham v. BMO Harris Bank, N.A., No. 13–1460 (D.Conn. July 16, 2014); Moss, 2014 WL 2562824, at * 5–6; Elder v. BMO Harris Bank, N.A., No. 13–3043, 2014 WL 1429334, at *1 (D.Md. Apr.11, 2014). 6 Because we found that equitable estoppel applies, we need not determine whether Defendants are third- party beneficiaries of the Loan Agreements or agents of the Lenders. B. Legality of the Loan Agreements and Unclean Hands Plaintiff also argues that the Court should not enforce the arbitration provisions because they are contained within allegedly illegal Loan Agreements. Plaintiff fails to recognize that we do not have authority to decide that issue. Plaintiff's argument attacks the legality of the entire Loan Agreement-not the individual arbitration provisions. The Supreme Court established in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445–446, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), that “unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance.” Accordingly, we will leave the determination of the legality of the Loan Agreements to the arbitrator. 7 7 Plaintiff attempts to claim that she is challenging the validity of the arbitration provisions by alleging that the arbitration provisions are linked to illegal ACH Authorizations. In essence, Plaintiff contends that before we can compel arbitration, we must determine whether the ACH Authorizations were illegal, and thus whether there is a possibility the arbitration agreements were also illegal because of their relation to the ACH Authorizations. We reject this argument. Plaintiff has not identified any facts that suggest the ACH Authorizations were illegal. Plaintiff's argument that Defendants have unclean hands fails for a similar reason. Plaintiff contends that Defendants aided and abetted the illegal Loan Agreements, and thus they have unclean hands and should not be permitted to benefit from the doctrine of equitable estoppel. Again, Plaintiff is not specifically attacking the arbitration provision, but Defendants actions with regard to the Loan Agreement as a whole. This is again an issue for the arbitrator because any challenge to the validity of the entire contract must go to the arbitrator. In re A2P SMS Antitrust Litig. ., 972 F.Supp.2d 465, 482 (S.D.N.Y.2013) (stating that “in contesting the application of equitable estoppel, Plaintiffs still must discuss why Defendants' hands are unclean with regard to the ‘making of the agreement to arbitrate’ ” (quoting Buckeye, 546 U.S. at 446)). As such, Plaintiff's arguments concerning the legality of the Loan Agreements and Defendants' alleged unclean hands do not affect Defendants' ability to enforce the arbitration provisions. IV. CONCLUSION *8 For the foregoing reasons, Defendants' Motions to Compel Arbitration will be granted. In addition, Plaintiff's claims will be dismissed because all the claims in the Complaint are subject to arbitration as provided in the Loan Agreements. Seus v. John Nuveen & Co., Inc., 146 F.3d 175, 179 (3d Cir.1998) (“If all the claims involved in an action are arbitrable, a court may dismiss the action instead of staying it.”). An appropriate Order follows. ORDER AND NOW, this 11th day of August, 2014, upon consideration of Defendant First International Bank & Trust's Motion to Compel Arbitration (ECF No. 34), Defendant BMO Harris Bank, N.A.'s Motion to Compel Arbitration (ECF No. 40), and Defendant North American Banking Company's Motion to Compel Arbitration (ECF No. 46), and all papers submitted in support thereof and in opposition thereto, it is ORDERED as follows: Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 23 of 136 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 1. Defendant First International Bank & Trust's Motion to Compel Arbitration (ECF No. 34), Defendant BMO Harris Bank, N.A.'s Motion to Compel Arbitration (ECF No. 40), and Defendant North American Banking Company's Motion to Compel Arbitration (ECF No. 46) are GRANTED. 2. Defendant BMO Harris Bank, N.A.'s Motion to Sever (ECF No. 38), Motion to Transfer (ECF No. 39), and Motion to Dismiss (ECF No. 42) are DENIED as moot. 3. Plaintiff's Complaint is DISMISSED without prejudice and the Clerk of Court is directed to close this matter. IT IS SO ORDERED. All Citations Not Reported in F.Supp.3d, 2014 WL 3952945 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 24 of 136 C Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 25 of 136 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 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.) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 26 of 136 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 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. ...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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 27 of 136 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 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 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 28 of 136 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 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 (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.) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 29 of 136 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 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 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.) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 30 of 136 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 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, 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) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 31 of 136 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 (“[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 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. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 32 of 136 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 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 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-01345-MWB Document 73-1 Filed 06/27/17 Page 33 of 136 D Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 34 of 136 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA CHESAPEAKE APPALACHIA, : 4:14-CV-0620 L.L.C., : : Plaintiff, : (Judge Brann) v. : : SCOUT PETROLEUM, LLC, and : SCOUT PETROLEUM II, LP, : : Defendants. : MEMORANDUM APRIL 28, 2017 I. BACKGROUND: Plaintiff, Chesapeake Appalachia, LLC, hereinafter “Chesapeake,” commenced the instant civil action on April 1, 2014, against Defendants, Scout Petroleum, LLC and Scout Petroleum II, LP (hereinafter, collectively, “Scout”). The two-count complaint was filed after Scout initiated arbitration proceedings against Chesapeake with the American Arbitration Association (hereinafter “AAA”). Count I is a demand for a declaratory judgment requesting that the Court decide whether it or the arbitrator is tasked to interpret the contract, commonly referred to as the “who decides” question. Count II is a demand for a declaratory 1 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 1 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 35 of 136 judgment contending that the contract does not permit class arbitration, commonly referred to as the “clause construction” question. On October 16, 2014, I granted Chesapeake’s motion for partial summary judgment on Count I and entered a declaratory judgment to the effect that the Court is to interpret the contract. Thereafter, I heard oral argument on Scout’s motion for reconsideration, which I denied on December 19, 2014, and then certified that decision for interlocutory appeal. On January 27, 2016, the United States Court of Appeals for the Third Circuit affirmed my determination that a court, not an arbitrator, is charged with interpreting the clause at issue. The parties are now before the Court for resolution of Count II, the “clause construction” question. Chesapeake moves for partial summary judgment requesting that the Court enter a declaratory judgment that the various contracts at issue do not permit class arbitration, only what is called individual or bilateral arbitration. Scout moves to dismiss the complaint arguing that Pennsylvania contract law permits class arbitration. Scout again requested oral argument on the motions and the parties were heard on April 5, 2017. For the reasons that follow, Scout’s motion will be denied, Chesapeake’s motion will be granted, and final judgment will be entered in favor of Chesapeake. 2 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 2 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 36 of 136 II. DISCUSSION: A. Standard of Review Summary judgment is appropriate where “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.”1 A fact is “material” where it “might affect the outcome of the suit under the governing law.”2 A dispute is “genuine” where “the evidence is such that a reasonable jury,” giving credence to the evidence favoring the nonmovant and making all inferences in the nonmovant’s favor, “could return a verdict for the nonmoving party.”3 The burden of establishing the nonexistence of a “genuine issue” is on the party moving for summary judgment.4 The moving party may satisfy this burden by either (I) submitting affirmative evidence that negates an essential element of the nonmoving party’s claim; or (ii) demonstrating to the court that the nonmoving party’s evidence is insufficient to establish an essential element of the nonmoving party’s case.5 1 Fed. R. Civ. P. 56(a). 2 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 3 Id. 4 In re Bressman, 327 F.3d 229, 237 (3d Cir. 2003) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986) (Brennan, J., dissenting)). 5 Id. at 331. 3 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 3 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 7 of 136 Where the moving party’s motion is properly supported, the nonmoving party, to avoid summary judgment in his opponent’s favor, must answer by setting forth “genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.”6 For movants and nonmovants alike, the assertion “that a fact cannot be or is genuinely disputed must” be supported by “materials in the record” that go beyond mere allegations, or by “showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.”7 “When opposing summary judgment, the non-movant may not rest upon mere allegations, but rather must ‘identify those facts of record which would contradict the facts identified by the movant.’”8 Furthermore, “[i]f a party fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact as required by Rule 56©, the court may . . . consider the fact undisputed for purposes of the motion.”9 In deciding the merits of a party’s motion for summary judgment, the court’s role is not to evaluate the evidence and decide the truth of the matter, but 6 Anderson, 477 U.S. at 250. 7 Fed. R. Civ. P. 56(c)(1); see also Anderson, 477 U.S. at 248–50. 8 Port Auth. of N.Y. and N.J. v. Affiliated FM Ins. Co., 311 F.3d 226, 233 (3d Cir. 2003). 9 Fed. R. Civ. P. 56(e)(2). 4 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 4 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 38 of 136 instead to determine whether there is a genuine issue for trial.10 Credibility determinations are the province of the factfinder, not the district court.11 Although the court may consider any materials in the record, it need only consider those materials cited.12 B. Facts In 2008, Chesapeake entered into various paid-up oil & gas leases with landowners in several northeastern Pennsylvania counties to explore for, and produce natural gas from, the landowners’ property. The leases at issue are standard natural gas leases, which consist of a basic boilerplate form contract, often together with an individually negotiated addendum. In 2013, Scout purchased the right to certain of the leases from certain landowners and has received royalties from Chesapeake on the gas produced from these mineral estates. On March 17, 2014, Scout sought to commence a class arbitration against Chesapeake. Scout’s attempt to pursue class arbitration is on behalf of themselves, together with a putative class of thousands of landowners. The claims deal with the calculation of royalties under the terms of the natural gas leases. 10 Anderson, 477 U.S. at 249. 11 BWM, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). 12 Fed. R. Civ. P. 56(c)(3). 5 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 5 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 39 of 136 The leases at issue contain the following pertinent arbitration provision: ARBITRATION. In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee’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 Lessor and Lessee.13 Chesapeake asserts that the above-cited lease term does not provide for, or otherwise contemplate, class arbitration; instead it envisions only individual arbitration. Chesapeake filed the instant action and motion for equitable relief seeking to have the Court declare that class arbitration is not available under the leases. C. Analysis As it turns out, this exact issue was recently decided based on identical language from Chesapeake’s leases. The Honorable John E. Jones III, of this Court, held in Chesapeake Appalachia, L.L.C. v. Ostroski, 199 F. Supp. 3d 912 (M.D. Pa. 2016), that the lease language at issue does not permit class arbitration. In Ostroski, Judge Jones granted summary judgment in Chesapeake’s favor and declared that the lease with identical language to the leases in the matter at hand does not permit class arbitration. In doing so, Judge Jones stated: 13 ECF No. 1 at 7 citing Ex. A at SCOUT I-000181. 6 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 6 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 40 of 136 It is undisputed that the arbitration clause of the Lease does not mention class arbitration. ***** Our analysis on this point is necessarily abbreviated because the jurisprudence is abundantly clear. Because the plain language of the arbitration clause in the Lease is silent as to class arbitration, we find that the Lease does not allow Defendants to compel it.14 With that conclusion in mind, then, I turn my attention to the law of the case doctrine. “The law-of-the-case doctrine rests on a simple premise: ‘the same issue presented a second time in the same case in the same court should lead to the same result.’”15 While I certainly acknowledge that the matter before this Court is not precisely the matter litigated before my colleague in Ostroski, it’s close. It would be extraordinary indeed for me to hold differently than did Judge Jones when presented with the same lease language, from the same Plaintiff, in the same Court. Moreover, and perhaps more importantly I agree with Judge Jones’s holding and sound legal reasoning. Considering the matter more broadly, I am also cognizant that the United States Supreme Court stated in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. that “a party may not be compelled under the FAA to submit to class arbitration unless 14 Chesapeake Appalachia, L.L.C., 199 F. Supp. 3d at 916- 917. 15 Kimberlin v. Quinlan, 199 F.3d 496, 500 (D.C. Cir. 1999) citing LaShawn A. v. Barry, 87 F.3d 1389, 1393 (D.C. Cir. 1996) (en banc). 7 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 7 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 41 of 136 there is a contractual basis for concluding that the party agreed to do so.”16 “This is so because class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator.”17 “In bilateral arbitration, parties forgo the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution: lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.”18 “But the relative benefits of class-action arbitration are much less assured, giving reason to doubt the parties' mutual consent to resolve disputes through class-wide arbitration.”19 The Supreme Court declined to allow class arbitration in Stolt-Nielsen where the contract referred explicitly to bilateral arbitration but was silent as to class arbitration. “An arbitrator chosen according to an agreed-upon procedure no longer resolves a single dispute between the parties to a single agreement, but instead resolves many disputes between hundreds or perhaps even thousands of parties.”20 “Under the Class Rules [of the American Arbitration Association], ‘the 16 Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 684, 130 S. Ct. 1758, 1775, 176 L. Ed. 2d 605 (2010) 17 Id. 18 Id. 19 Id. at 685-686. 20 Id. at 686. 8 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 8 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 42 of 136 presumption of privacy and confidentiality’ that applies in many bilateral arbitrations ‘shall not apply in class arbitrations.’”21 Moreover, the United States Court of Appeals for the Sixth Circuit in Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett found that the clause22 at issue in that case did “not mention classwide arbitration at all.”23 The Sixth Circuit stated: The principal reason to conclude that this arbitration clause does not authorize classwide arbitration is that the clause nowhere mentions it. A second reason, as the district court correctly observed, is that the clause limits its scope to claims “arising from or in connection with this Order,” as opposed to other customers’ orders. Crockett responds that the arbitration clause refers to the AAA’s Commercial Rules, which themselves incorporate the AAA’s Supplemental Rules for Class Arbitration. But the Supplemental Rules expressly state that one should “not consider the existence of these Supplementary Rules, or any other AAA rules, to be a factor either in favor of or against permitting the arbitration to proceed on a class basis.” Crockett also responds that the agreement does not expressly exclude the possibility of classwide arbitration, which is true enough. But the agreement does not include it either, which is what the agreement needs to do in order for us to force that momentous consequence upon the parties here. The Supreme Court has made clear that “[a]n implicit agreement to authorize class-action arbitration” should not be inferred “solely from the fact of the parties' agreement to arbitrate.” Stolt–Nielsen, 559 U.S. 21 Id. 22 That clause stated: Except as provided below, any controversy, claim or counterclaim (whether characterized as permissive or compulsory) arising out of or in connection with this Order (including any amendment or addenda thereto), whether based on contract, tort, statute, or other legal theory (including but not limited to any claim of fraud or misrepresentation) will be resolved by binding arbitration under this section and the then-current Commercial Rules and supervision of the American Arbitration Association (“AAA”). 23 Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013). 9 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 9 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 43 of 136 at 685, 130 S.Ct. 1758. That, at bottom, is the inference that Crockett asks us to make here. The agreement in this case does not provide for classwide arbitration.24 This reasoning is also, to my mind, persuasive. Scout in contrast attempts to construct its arguments on two cases, both inapposite. The first case hails from the Third Circuit, Opalinski v. Robert Half Int’l Inc., and known as Opalinski II.25 Scout contends that although class arbitration was not explicitly mentioned in the clause in the case at bar, it is implicitly assumed. Scout tries to make the same unpersuasive argument that the Opalinski II plaintiffs made, which was rejected by the Third Circuit. “Several other Circuits, including the Fifth, Sixth, Seventh, Eighth, and Ninth, have likewise stated that “silence” in an agreement regarding class arbitration generally indicates that it is not authorized by the agreement.”26 24 Id. at 599-600. 25 Opalinski v. Robert Half Int’l Inc., 2017 U.S. App. LEXIS 1594 (3d Cir. N.J. Jan. 30, 2017). 26 Id. citing Eshagh v. Terminix Int’l Co., 588 F. App’x 703, 704 (9th Cir. 2014) (affirming the district court’s grant of a motion to strike class allegations, where the arbitration agreement did not mention class arbitration); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013) (“The principal reason to conclude that this arbitration clause does not authorize classwide arbitration is that the clause nowhere mentions it.”); Reed v. Fla. Metro. Univ., Inc., 681 F.3d 630, 643-44 (5th Cir. 2012) (finding that silence in an agreement does not “constitute[ ] consent to class arbitration” (internal quotation marks omitted)), abrogated on other grounds by Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 186 L. Ed. 2d 113 (2013); Dominium Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 728-29 (8th Cir. 2001) (holding that the district court [*8] did not err by compelling individual, rather than class, arbitration because the relevant agreements were silent as to class arbitration); Champ v. Siegel Trading Co., 55 F.3d 269, 275 (7th Cir. 1995) (stating “the FAA forbids federal judges from ordering class arbitration where the parties’ arbitration agreement is silent on the matter”). 10 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 10 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 44 f 6 Scout also cites to a Pennsylvania Superior Court decision, Dickler v. Shearson Lehman Hutton, Inc., 408 Pa. Super. 286, 299, 596 A.2d 860, 866 (1991) to support its argument. Dickler is incongruent for two reasons. First, Dickler was decided in 1991, twelve years before the United States Supreme Court commenced its analysis in this area of law. As I noted in my Order of December 19, 2014, “The rocky path the issue of class arbitrability has traversed over the years began eleven years ago with the United States Supreme Court's plurality decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S. Ct. 2402, 156 L.Ed.2d 414 (2003).” The Supreme Court next decided Stolt- Neilsen in 2010. The Sixth Circuit later decided Reed-Elsiver in 2013. This Court then decided Ostroski in 2016. Second, the Dickler contract clause language is distinguishable from the clause at issue while the Ostroski contract clause is identical. I can discern no plausible legal basis for this Court to rely on Dickler when decisions, contrary to it, have been made in this Court, various Courts of Appeals and by the United States Supreme Court. Even if I accept Scout’s argument that I should find an implicit reference to class arbitration and therefore apply Pennsylvania contract law, including Dickler, I would still not find that the plain language of the contract permits class arbitration. “The fundamental rule in contract interpretation is to 11 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 11 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 45 f 6 ascertain the intent of the contracting parties.”27 “In cases of a written contract, the intent of the parties is the writing itself.”28 “The task of interpreting a contract is [an issue of law decided] by a court.”29 Dickler is compelling in one limited way, however. It stated “the Court has consistently reiterated this policy of respecting arbitration agreements.”30 That is precisely what I do in the instant matter. The contracts at issue here clearly allow for arbitration; but what the plain language of the leases allow is individual or bilateral arbitration, not a class arbitration. The language in this matter is written in the singular, which indicates individual or bilateral arbitration, i.e.: “in the event of a disagreement between lessor and lessee concerning this lease.” The clause at issue in Dickler was drafted plurally, and states: “any controversy arising out of or relating to my accounts, to transactions with you, your officers, directors agents and/or employees for me...shall be settled by arbitration.” This is what distinguishes Dickler - the actual language utilized in the contract. 27 Ins. Adjustment Bureau, Inc. v. Allstate Ins. Cos., 588 Pa. 470, 480, 905 A.2d 462, 468 (2006) citing Robert F. Felte, Inc. v. White, 451 Pa. 137, 302 A.2d 347, 351 (1973). 28 Id. citing . Pines Plaza Bowling, Inc. v. Rossview, Inc., 394 Pa. 124, 145 A.2d 672 (1958). 29 Standard Venetian Blind Co. v. Am. Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983). 30 Dickler v. Shearson Lehman Hutton, Inc., 596 A.2d 860, 862 (Pa. Super. 1991) 12 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 12 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 46 f 6 The Dickler Court also wrote “we find that the broad agreement [ ] signed by the parties encompasses all controversies ...which may continue through arbitration on a class-wide basis.”31 Therefore, even applying Dickler, I still find that judgment should be entered in Chesapeake’s favor. III. CONCLUSION: For all of the foregoing reasons, Chesapeake’s motion will be granted. A separate Order will issue granting Plaintiff’s motion for summary judgment on Count II and denying Defendants’ motion to dismiss Count II. Final judgment will be entered in favor of Plaintiff and against Defendants and this case is dismissed. BY THE COURT: s/Matthew W. Brann Matthew W. Brann United States District Judge 31 Dickler at 288. 13 Case 4:14-cv-00620-MWB Document 99 Filed 04/28/17 Page 13 of 13Case 4:16-cv-01345-MWB Document 73-1 il 6/ 7/ 47 f 6 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA CHESAPEAKE APPALACHIA, : 4:14-CV-0620 L.L.C., : : Plaintiff, : (Judge Brann) v. : : SCOUT PETROLEUM, LLC, and : SCOUT PETROLEUM II, LP, : : Defendants. : ORDER APRIL 28, 2017 In accordance with the memorandum issued this date, IT IS HEREBY ORDERED THAT: 1. Plaintiff’s Motion for Summary Judgment on Count II is GRANTED. January 10, 2017, ECF No. 85. 2. Defendants’ Motion to Dismiss Count II is DENIED. January 10, 2017, ECF No. 83. 3. Final Judgment is entered in favor of Plaintiff and against Defendants. 4. The Clerk is directed to close the case file. BY THE COURT: s/ Matthew W. Brann Matthew W. Brann United States District Judge Case 4:14-cv-00620-MWB Document 100 Filed 04/28/17 Page 1 of 1Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 48 f 36 E Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 49 of 136 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. 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 50 of 136 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 *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 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. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 51 of 136 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 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. (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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 52 of 136 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 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, 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 53 of 136 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 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., 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 54 of 136 Colon v. Conchetta, Inc., Slip Copy (2017) 2017 WL 2572517 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 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). 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-01345-MWB Document 73-1 Filed 06/27/17 Page 55 of 136 F Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 56 of 136 Cott v. Waldron, LP, Slip Copy (2016) 2016 WL 3166269 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2016 WL 3166269 Only the Westlaw citation is currently available. United States District Court, W.D. Pennsylvania. Richard M. Cott, Plaintiff, v. Waldron, LP, Defendant. Civil Action No. 15-1259 | Signed May 2, 2015 | Filed 05/02/2016 Re: ECF No. 17 REPORT AND RECOMMENDATION MAUREEN P. KELLY, CHIEF UNITED STATES MAGISTRATE JUDGE I. RECOMMENDATION *1 Plaintiff Richard M. Cott (“Plaintiff”) brought this civil action against Defendant Waldron, LP (“Defendant”) on September 25, 2015, alleging that Defendant discriminated against him in violation of 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”), when Defendant terminated his employment in May of 2014. ECF No. 1. On December 4, 2015, Defendant filed an Answer to the Complaint and a Counterclaim against Plaintiff for breach of contract. ECF No. 9. Presently before the Court is Plaintiff's Motion to Dismiss and Compel Arbitration of Counterclaim (“the Motion”). ECF No. 17. For the reasons that follow, it is respectfully recommended that the Motion be granted. II. REPORT A. FACTUAL AND PROCEDURAL BACKGROUND It appears undisputed that Plaintiff began his employment with Defendant in August of 2013 and that his compensation package included a $700,000.00 forgivable loan (“the Loan”), which was to be paid to Plaintiff in installments. ECF No. 9 at 8, ¶ 11. According to the Counterclaim and the Transition Promissory Note (“the Note”), which sets forth the terms of the Loan, the Loan would be forgiven only if Plaintiff remained in Waldron's employment for forty-eight months; Plaintiff paid to Defendant all applicable federal, state and local taxes on the Loan; and that no event of default occurred. Id. at 8-9, ¶ 12. See ECF No. 17-1 ¶ 2. It also appears that under the terms of the Note, the termination of Plaintiff's employment “for any reason, with or without cause,” would constitute an event of default, which would permit Defendant to declare the entire disbursed but unpaid principal balance of the Loan to be immediately due. ECF No. 9 at 9, ¶ 13; at 11, ¶ 28. See ECF No. 17-1 ¶ 3. Defendant terminated Plaintiff's employment in May of 2014. On July 24, 2014, Defendant notified Plaintiff that $175,000.00 of the unpaid principal balance of the Loan, plus interest, costs and fees were immediately due and owing. ECF No. 9 at 11, ¶ 31. Plaintiff has apparently refused to pay. Id. ¶ 32. Accordingly, on December 4, 2015, Defendant filed a Counterclaim alleging that Plaintiff has breached his contractual duties and obligations under the terms of the Loan. Id. Plaintiff filed the instant Motion on December 28, 2015, arguing that the plain and unambiguous language of the Note indicates that Defendant is obligated to arbitrate its breach of contract claim. ECF No. 17. Defendant filed a Response to the Motion on January 19, 2016, and Plaintiff filed a Reply Brief on February 1, 2016. ECF Nos. 22, 23. As such, the Motion is ripe for review. B. STANDARD OF REVIEW “Because ‘[a]rbitration is a matter of contract between the parties,’ a judicial mandate to arbitrate must be predicated upon the parties' consent.” Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir. 2013), quoting Par–Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980). Thus, although the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1, et seq., permits the enforcement of a contract to arbitrate, it requires that a court first satisfy itself that the making of the agreement to arbitrate is not in issue. Id., citing 9 U.S.C. § 4. In determining whether an agreement to arbitrate was actually reached, the United States Court of Appeals for the Third Circuit has found that the appropriate standard to be applied depends on Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 57 of 136 Cott v. Waldron, LP, Slip Copy (2016) 2016 WL 3166269 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 the circumstances of the particular case. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d at 774-776. Specifically, the Court of Appeals held that: *2 when it is apparent, based on the face of a 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 arbitration, this time judging the motion under a summary judgment standard. Id. at 776. Here, although the parties have arrived at different conclusions, they appear to agree that the question of arbitrability can be decided on the face of the Counterclaim and the documents relied upon therein. As such, the Court is properly guided by the standard governing Rule 12(b)(6) motions in resolving the instant dispute. The question therefore becomes whether, under any plausible reading of the Counterclaim, Defendant's breach of contract claim is properly pursued in this Court or whether the allegations in the Counterclaim establish, absent any speculation, that the parties agreed to arbitrate the claim. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). In so deciding, the Court must accept as true all material allegations in the Counterclaim and all reasonable factual inferences must be viewed in the light most favorable to Defendant as the Counter-Claimant. Odd v. Malone, 538 F.3d 202, 205 (3d Cir. 2008). The Court, however, need not accept bald assertions or inferences drawn by Defendant if they are unsupported by the facts set forth in the Counterclaim. See California Pub. Emp. Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004), citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Nor must the Court accept legal conclusions set forth as factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. at 555. C. DISCUSSION The FAA provides 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 such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA also provides that “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States District Court ... for an Order directing that such arbitration proceed in the manner provided in the agreement.” 9 U.S.C. § 4. See Grimm v. First Nat'l Bank of Pa., 578 F. Supp. 2d 785, 791 (W.D. Pa. 2008). See also Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d at 773 (“questions of arbitrability ... are presumed to be questions for judicial determination”). Under these provisions, “federal law places ‘arbitration agreements on an equal footing with other contracts,’ and requires courts to ‘enforce them according to their terms.’ ” CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 172-73 (3d Cir. 2014), quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). Accordingly, when deciding a motion to compel arbitration, the court must address two issues: (1) whether the parties have entered into a valid written agreement to arbitrate, and (2) whether the dispute in question falls within the scope of that agreement. Schrock v. Nomac Drilling, LLC, No. 2:15- CV-1692, 2016 WL 1181484, at *2-3 (W.D. Pa. Mar. 28, 2016), citing Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 523 (3d Cir. 2009). *3 In the instant case, the parties do not dispute that they entered into a valid written agreement to arbitrate. The only question before the Court therefore is whether Defendant's breach of contract claim falls within the scope of that agreement. “In assessing whether a particular dispute falls within the scope of an arbitration clause, “[the] ‘focus [is] on the factual underpinnings of the claim rather than the Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 58 of 136 Cott v. Waldron, LP, Slip Copy (2016) 2016 WL 3166269 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 legal theory alleged in the complaint.’ ” CardioNet, Inc. v. Cigna Health Corp., 751 F.3d at 172-73, quoting Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir. 2001). “In so doing, [the court can] ‘prevent[ ] a creative and artful pleader from drafting around an otherwise-applicable arbitration clause.’ ” Id., quoting Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc., 567 F.3d 1191, 1198 (10th Cir. 2009). The court therefore should first look to the contractual language in the arbitration clause at issue. Id. The arbitration clause contained in the Note at issue here provides that: Arbitration Clause. Waldron and you agree that any action instituted as a result of any controversy arising out of this Note, or as a result of any section interpretation thereof, shall be brought before the arbitration facility of the Financial Industry Regulatory Authority to the exclusion of all others. You agree that arbitration shall be your exclusive remedy and that the results of such arbitration shall be final and binding upon you. Judgment upon any award rendered by an arbitration panel may be entered in any state or federal court of competent jurisdiction. ECF No. 71-1 at 3, ¶ 7. It appears clear from this language that the parties intended to arbitrate “any controversy arising out of [the] Note.” Because Defendant's Counterclaim is based on Plaintiff's alleged breach of the Note, it necessarily constitutes a controversy arising out of the Note. Defendant's breach of contract claim therefore falls within the scope of the arbitration agreement and Defendant is obligated to arbitrate its claim. Defendant nevertheless argues that, given the termination of Plaintiff's employment, the arbitration clause does not apply in this case because there is no controversy or dispute regarding the existence of Plaintiff's debt or that he is required to repay the unforgiven portions of the Loan that he received. Plaintiff, however, obviously does dispute that he is required to repay Defendant the portion of the Loan he received or there would be no need for Defendant to have filed the instant Counterclaim and no controversy to be adjudicated. Defendant also points to Section 4 of the Note regarding “Remedies” which provides that “[u]pon the occurrence of an Event of Default ... Waldron may, at its option, declare the entire disbursed but unpaid principal balance of this Note immediately due and payable ... and Waldron may exercise any and all rights and remedies available to it under applicable law with respect to the enforcement and collection of this Note.” Defendant argues that under this provision it is permitted to pursue its breach of contract claim in this Court. RCF No. 17-1 at 2, ¶ 4. Defendant's argument, however, overlooks the plain language of the arbitration clause which governs the issue before the Court. Because the arbitration clause dictates the forum in which disputes arising out of the Note are to be adjudicated and mandates that those controversies are to be arbitrated before the Federal Industry Regulatory Authority, it appears that any right and remedy other than arbitration is not available to Defendant under those circumstances. Section 4 therefore does not provide the basis for Defendant to side-step the arbitration clause to which it agreed. *4 Defendant further argues that because Plaintiff was the first to file suit relative to the termination of his employment, he has placed his entire employment relationship with Defendant at issue and that because the terms and conditions of his employment were outlined in documents in addition to the Note, i.e, a July 24, 2013 offer letter and an Employment Agreement, the Court should also look to these documents to determine whether its breach of contract claim is subject to arbitration. Specifically, Defendant asks the Court to consider the language in the Employment Agreement entered into by the parties which apparently states that “[a]ny litigation initiated as a result of a breach or alleged breach of this agreement must be filed and pursued in Allegheny County, Pennsylvania.” See ECF No. 22 at 5 (emphasis added). Clearly, this provision applies to any litigation resulting from a breach of the Employment Agreement. Defendant, however, has not alleged that Plaintiff breached the Employment Agreement but rather has alleged that Plaintiff breached the terms of the Note. Thus, the only issue before the Court is whether Defendant's Counterclaim falls within the scope of the Note and the terms of the Employment Agreement are irrelevant. Defendant also argues that because its Counterclaim arises out of the same operative facts that form the basis of Plaintiff's Complaint, i.e., whether Defendant's decision to terminate Plaintiff's employment was based on legitimate business reasons, it was required under the Federal Rules Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 59 of 136 Cott v. Waldron, LP, Slip Copy (2016) 2016 WL 3166269 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 of Civil Procedure to file its Counterclaim. The Court disagrees. Although as a general matter it is clear that all of the claims brought by the parties arise out of their employment relationship, the similarity between Plaintiff's claims and that raised by Defendant ends there. Plaintiff's claims require the Court to inquire into the reasons for Plaintiff's discharge, i.e., whether Defendant did so unlawfully in violation of the ADA and the PHRA or whether it did so for legitimate nondiscriminatory business reasons, i.e., Plaintiff's poor performance. Defendant's Counterclaim, however, revolves solely around Plaintiff's contractual obligations under the terms of the Note following his termination. Indeed, none of the facts offered by Defendant in support of its breach of contract claim mirror those set forth by Plaintiff to support his ADA and PHRA claims. See ECF Nos. 1, 9. Defendant's Counterclaim therefore does not “arise[ ] out of the transaction or occurrence that is the subject matter of [Plaintiff's] claim,” and is not, as Defendant suggests, a compulsory counterclaim brought pursuant to Fed. R. Civ. P. 13(a)(1)(A). Under these circumstances, Defendant's argument that it was required to bring its Counterclaim in this Court is unavailing. Finally, in the alternative, Defendant argues that, because review of the Note, the Employment Agreement and it's legal arguments “show that the parties disagree on whether the Arbitration provision of the Note applies to [its] Counterclaim,” it should “be permitted to engage in limited discovery to determine whether [Defendant's] Counterclaim must be submitted to arbitration.” ECF No. 22 at 7. As the Court of Appeals for the Third Circuit has found: [A] Rule 12(b)(6) standard is inappropriate when either ‘the motion to compel arbitration does not have as its predicate a complaint with the requisite clarity’ to establish on its face that the parties agreed to arbitrate ... 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.... Under the first scenario, arbitrability not being apparent on the face of the complaint, the motion to compel arbitration must be denied pending further development of the factual record. The second scenario will come into play when the complaint and incorporated documents facially establish arbitrability but the non-movant has come forward with enough evidence in response to the motion to compel arbitration to place the question in issue. At that point, the Rule 12(b)(6) standard is no longer appropriate, and the issue should be judged under the Rule 56 standard.... (judging motion to compel arbitration under summary judgment standard where plaintiff presented “[a]n unequivocal denial that the agreement had been made, accompanied by supporting affidavits”). *5 Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d at 774 (internal citations omitted). “Under either of those scenarios, a ‘restricted inquiry into 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 on the narrow issue concerning the validity’ of the arbitration agreement ....” Id., quoting Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 22 (1983) and Deputy v. Lehman Bros., Inc., 345 F.3d 494, 511 (7th Cir. 2003). In the instant case, however, the Court has already found that Plaintiff's Motion is predicated on a complaint (or, in this case, the Counterclaim) that has the requisite clarity to establish on its face that the parties agreed to arbitrate and that the evidence and/or arguments proffered by Defendant in its Response to the Motion are insufficient to place the question of arbitrability at issue. Accordingly, Defendant's contention that it did not intend for its breach of contract claim to be arbitrated when it executed the Note and agreed to the arbitration clause contained therein, is nothing more than a naked assertion and does not provide the basis for granting discovery into the matter. D. CONCLUSION For the foregoing reasons, it is respectfully recommended that Plaintiff's Motion to Dismiss and Compel Arbitration of Counterclaim, ECF No. 17, be granted. In accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1), and Local Rule 72.D.2, the parties are permitted to file written objections in accordance with the schedule established in the docket entry reflecting the filing of this Report and Recommendation. Failure to timely file objections will waive the right to appeal. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 60 of 136 Cott v. Waldron, LP, Slip Copy (2016) 2016 WL 3166269 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Brightwell v. Lehman, 637 F.3d 187, 193 n.7 (3d Cir. 2011). Any party opposing objections may file their response to the objections within fourteen (14) days thereafter in accordance with Local Civil Rule 72.D.2. All Citations Slip Copy, 2016 WL 3166269 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 61 of 136 G Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 62 of 136 Cott v. Waldron, LP, Slip Copy (2016) 2016 WL 3136906 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2016 WL 3136906 Only the Westlaw citation is currently available. United States District Court, W.D. Pennsylvania. Richard M. Cott, Plaintiff, v. Waldron, LP, Defendant. Civil Action No. 15-1259 | Signed 06/06/2016 ORDER Re: ECF No. 17 Nora Barry Fischer, United States District Judge *1 AND NOW, this 6 th day of June, 2016, after Plaintiff Richard M. Cott filed an action in the above- captioned case and Defendant Waldron, LP filed a filed a Counterclaim against Plaintiff, and after Plaintiff filed a Motion to Dismiss and Compel Arbitration of Counterclaim, and after a Report and Recommendation was filed by the Chief United States Magistrate Judge in which it was recommended that the Motion to Dismiss and Compel Arbitration be granted, and upon consideration of the Objections filed by Defendant and the response to the Objections submitted by Plaintiff, and upon independent review of the record, and upon consideration of the Magistrate Judge's Report and Recommendation, which is adopted as the opinion of this Court, IT IS HEREBY ORDERED that the Motion to Dismiss and Compel Arbitration of Counterclaim submitted by Plaintiff, ECF No. 17, is GRANTED. All Citations Slip Copy, 2016 WL 3136906 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 63 of 136 H Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 64 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2016 WL 5661607 Only the Westlaw citation is currently available. United States District Court, N.D. Ohio, Eastern Division. Hope Christian Fellowship, et al., Plaintiffs, v. Chesapeake Energy Corporation, et al., Defendants. CASE NO. 4:15CV02275 | Signed 09/29/2016 MEMORANDUM OF OPINION AND ORDER [Resolving ECF No. 15] Benita Y. Pearson, United States District Judge *1 Pending is the Motion to Compel Individual Arbitration and Motion to Stay, ECF No. 15, filed by Defendants Chesapeake Energy Corporation (“Chesapeake Energy”) and Chesapeake Operating, L.L.C. (“Chesapeake Operating”) (collectively “Defendants”). Plaintiffs (“Royalty Owners”) filed an Opposition, ECF Nos. 17. Defendants filed a Reply, ECF No. 20. For the reasons that follow, the motion to compel individual arbitration is granted, and the motion to stay is granted. I. Background As Defendants state, “This case is part of a web of class actions filed in multiple tribunals—on behalf of overlapping groups of [the] same plaintiffs—all by the same Plaintiffs' counsel and all based on the same basic premise that Chesapeake entities allegedly underpaid royalties due under oil and gas leases.” 1 Brief in Support, ECF No. 15–1 at PageID #: 167. Royalty Owners entered into oil and gas leases (“Leases”) with non-party Chesapeake Exploration, L.L.C. (“Chesapeake Exploration”), leasing their oil and gas rights to real property located in Ohio. See Amended Class Action Complaint, ECF No. 5 ¶ 1. Defendants are affiliates of signatory Chesapeake Exploration, but are not themselves signatories to the Leases. See Brief in Support, ECF No. 15–1 at PageID #: 170–71. Chesapeake Exploration produces the gas, while Defendants “hold the proceeds of the sale of the gas, calculate the royalties [, and] issue the royalty checks.” 2 Amended Class Action Complaint, ECF No. 5 ¶¶ 6–7. In this putative class action, the Royalty Owners assert that Defendants' allegedly fraudulent underpayment of oil and gas royalties amounted to conversion, and violation of the Ohio Corrupt Practices Act, R.C. § 2923.31, et seq. (“Ohio RICO Act”).See Amended Class Action Complaint, ECF No. 5 ¶ 8–16. 1 This action is related to two other actions that were filed in this Court: Chesapeake Exploration, L.L.C. v. Henceroth, et al., Case No. 4:16CV00150 (N.D. Ohio) ; Henceroth, et al. v. Chesapeake Exploration, LLC, Case No. 4:15CV02591 (N.D. Ohio). 2 Some of the Royalty Owners have not yet received royalty checks. See Amended Class Action Complaint, ECF No. 5 ¶¶ 2–3. Defendants filed the motions now under review, ECF No. 15, asking the Court to compel individual arbitration as to the Royalty Owners whose Leases contain an arbitration provision, and to stay the case as to the remaining Royalty Owners. 3 3 Only ten (10) of the forty (40) named Royalty Owners have a Lease that does not contain an arbitration provision. See Brief in Support, ECF No. 15–1 at PageID #: 168. II. Motion to Compel Individual Arbitration The Royalty Owners disagree with Defendants' contention that their claims must be submitted to arbitration pursuant to the Leases. See generally Opposition, ECF No. 17. “Before compelling an unwilling party to arbitration ... the court must engage in a limited review to determine whether the dispute is arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Richmond Health Facilities v. Nichols, 811 F.3d 192, 195 (6th Cir. 2016) (quoting Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003)). A. Valid Agreements to Arbitrate Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 65 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 *2 The following are the four types of arbitration provisions that appear in the Leases: • ARBITRATION. In the event of a disagreement between Lessor and Lessee concerning this Lease or the associated Order of Payment, performance thereunder, or damages caused by Lessee's operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association. Arbitration shall be the exclusive remedy and cover all disputes, including but not limited to, the formation, execution, validity and performance of the Lease and Order of Payment. All fees and costs associated with the arbitration shall be borne equally by Lessor and Lessee. • NOTICES AND ARBITRATION In the event either party considers that the other has not complied with any of its obligations hereunder, either express or implied, said party shall notify the other in writing setting out specifically in what respects the contract has been breached. The party served with such notice shall then have thirty (30) days after receipt of notice within which to meet or commence to meet all or any part of the breaches alleged. The service of said notice shall be mandatory prior to the bringing of any claim under this lease of any cause, and no such action shall be brought until the lapse of thirty (30) days after the service of such notice. Any controversy or claim arising out of or relating to this agreement shall be settled by arbitration. Either party may initiate any arbitration proceeding by notifying the other party in writing, but only after the aforementioned notice of breach [h]as been served and the time period for cure provided for in this lease has expired. The procedure to be followed in the event of any arbitration shall be that prescribed in the Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any Court having jurisdiction thereof. • Arbitration: Any controversy or claim arising out of or relating to this Lease or performance hereunder shall be ascertained and determined by three (3) disinterested arbitrators, one thereof to be appointed by Lessor, one by the Lessee, and the third by the two (2) so appointed as aforesaid, and the award of such collective group shall be final and conclusive. Arbitration proceedings hereunder shall be conducted at the county seat of the county where the Lease or action occurred which is cause for the arbitration, or such other place as the parties to such arbitration shall all be mutually agreed upon. Each party shall pay its own arbitrator and the costs of the third arbitrator shall be borne equally. Either party may, without waiving any remedy under this agreement seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights or property of that party, pending the establishment of the arbitral tribunal (or Pending the arbitral tribunal's determination of the merits of the controversy or claim). • Arbitration Any questions concerning the Lease or performance thereunder shall be ascertained and determined by three disinterested arbitrators, one thereof to be appointed by the Lessor, one by the Lessee and the third by the two so appointed, and the majority vote award of such collective group shall be final and conclusive. In the event that the two appointees of Lessor and Lessee cannot agree upon the third, the parties shall thereupon submit to the rules and procedures of the American Arbitration Association. Arbitration proceedings shall be conducted at the county seat of the county where the leased property is located or such other place as the parties to such arbitration shall all mutually agree. Each party shall pay its own arbitrator and the costs of the third arbitrator (umpire) shall be borne equally. The determination rendered by the arbitrators may be entered in the court of general jurisdiction in the county where the Leased Premises is located. *3 Either party may apply to the arbitrators seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved. Either party also may, without waiving any remedy under this agreement, seek from the court of general jurisdiction in the county where the Leased Premises is located any interim or provisional relief that is necessary to protect the rights of property of that party, pending the establishment of the arbitration tribunal and its decision. The arbitrators shall consider dispute issues in accordance with and subject to the terms of the Lease. Brief in Support, ECF No. 15–1 at PageID #: 172–73; see Motion Exs. C–F. The validity of the arbitration provisions is not in dispute. Rather, it is their scope (i.e., applicability) that is central to the parties' disagreement. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 66 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 B. Scope of Arbitration Provisions The Sixth Circuit has held that in determining the scope of an arbitration clause, a court must “ask if an action could be maintained without reference to the contract or relationship at issue.” Fazio v. Lehman Bros., Inc., 340 F.3d 386, 395 (6th Cir. 2003). The Royalty Owners do not assert (and the Court does not find persuasive) an argument that the substance of the claims would fall outside the scope of their arbitration provisions even if brought against signatory Chesapeake Exploration. The broad provisions cover disputes arising from performance and obligations under the Leases. See Brief in Support, ECF No. 15–1 at PageID #: 172–73; Motion Exs. C–F. Surely, if asserted against their contractual counter-party, the Royalty Owners' claims for fraudulent underpayment of the royalties owed under the Leases would be within the ambit of the arbitration provisions. See, e.g., Turi v. Main Street Adoption Services, LLP, 633 F.3d 496, 511 (“The plaintiffs' fee claims here—for unjust enrichment and for conversion—are clearly covered by the arbitration clause “regarding fees” and therefore must be resolved by arbitration.”). Instead, the linchpin of the Royalty Owners' arguments is that “the [arbitration] provisions are either (1) expressly limited to disputes between the parties [to the Leases] or (2) include no mechanism for the selection of arbitrators except in disputes between the parties.” Opposition, ECF No. 17 at PageID #: 354. Relatedly, they argue that, in general, a non-party cannot enforce a contractual agreement to arbitrate. Id. at PageID #: 352. (i) Non-party Enforcement of Arbitration Provisions “State law governs the question of whether a nonparty can enforce an arbitration clause against a party.” Thomas v. Right Choice Staffing Group, LLC, No. 15–10055, 2015 WL 4078173, at *6 (E.D. Mich. July 6, 2015) (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S.Ct. 1896, 173 L.Ed.3d 832 (2009)). There is no dispute that Ohio law is the applicable state law on this issue. Ohio courts adopt a presumption in favor of arbitration. See Rivera v. Rent A Center, Inc., No. 101959, 2015–Ohio– 3765, 2015 WL 5455882, at *2 ¶ 11 (Ohio Ct. App. Sept. 17, 2015). Moreover, “Ohio courts have recognized that a nonsignatory agent may enforce an arbitration agreement between a plaintiff and the agent's principal when ordinary principles of contract and agency law require.” Id. at *4 ¶ 20. According to the Ohio Court of Appeals, Ohio courts have also recognized an “alternate estoppel theory” whereby “arbitration may be compelled by a nonsignatory against a signatory due to 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.” ’ ” Under this theory, because the individual defendants' allegedly wrongful acts related to their actions as agents of the company that was a party to the arbitration agreement, the nonsignatory agents should also have the benefit of the arbitration agreement made by their principal. *4 Short v. Resource Title Agency, Inc., No. 95839, 2011 -Ohio- 1577, 2011 WL 1203906, at *3 ¶ 15 (Ohio Ct. App. March 31, 2011) (citations omitted). 4 4 This Sixth Circuit has recognized this principle. See, e.g., Bowie v. Clear Your Debt, LLC, 523 F. App'x 315, 317 (2013) ( “[N]onsignatories cannot ordinarily compel arbitration. But where there is an agency relationship between a signatory and a nonsignatory, the nonsignatory may compel arbitration. Javitch v. First Union Securities, 315 F.3d 619, 629 (6th Cir.2003)....Further, a signatory is estopped from avoiding arbitration with the nonsignatory where the nonsignatory's claims are intertwined with the underlying contract. Id.”); Crossville Med. Oncology, P.C. v. Glenwood Sys., LLC, 310 F. App'x 858, 860 (6th Cir. 2009) (“[N]onsignatories may be bound to an arbitration agreement under ordinary contract and agency principles.” (quoting Javitch, 315 F.3d at 629)). Unquestionably, signatory Chesapeake Exploration and non-signatory Defendants are closely affiliated entities. See Brief in Support, ECF No. 15-1 at PageID #: 175 (Defendant Chesapeake Energy is the parent corporation of signatory Chesapeake Exploration and Defendant Chesapeake Operating.); Corporate Disclosure Statement in Chesapeake Exploration, L.L.C., v. Henceroth, et al., Case No. 4:16CV00150, ECF No. 2 at PageID #: 145 (Defendant Chesapeake Operating is one of three L.L.C. members of signatory Chesapeake Exploration, and Defendant Chesapeake Energy is Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 67 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 the sole L.L.C. member of Defendant Chesapeake Operating.). Defendants execute signatory Chesapeake Exploration's Lease obligation to calculate royalties and issue royalty checks. See Amended Class Action Complaint, ECF No. 5 ¶¶ 6–7. The relationship between Defendants and signatory Chesapeake Exploration, as it pertains to the Leases at issue, is therefore one of agency. The gravamen of the Amended Class Action Complaint is that Defendants fraudulently underpaid royalties owed to the Royalty Owners under the Leases. See id. ¶ 9. This claim is inextricably intertwined with the Lease obligation of Defendants' principal, signatory Chesapeake Exploration, to correctly calculate and pay royalties. Under ordinary principles of contract and agency, Defendants are entitled to stand in the shoes of Chesapeake Exploration for purposes of compelling arbitration (and selecting arbitrators) as to the Royalty Owners whose Leases contain an arbitration provision. 5 Indeed, any different finding would allow the Royalty Owners, on a mere technicality, to circumvent their commitment to arbitrate disputes arising from their Leases—a result this Circuit has cautioned against. See Arnold v. Arnold Corp.-Printed Communications for Business, 920 F.2d 1269, 1281–82 (6th Cir. 5 The Court notes that Royalty Owners' claims are within the scope of the arbitration provisions even though they are styled as claims for conversion and violation of the Ohio RICO Act rather than as breach of contract claims. See, e.g., Shearson/ American Exp., Inc. v. McMahon, 482 U.S. 220, 240–42 (1987) (holding that civil RICO claims are arbitrable under the FAA); Health Quip, Inc. v. 8805, Inc., No. 1:06CV3022, 2007 WL 1452629, at *2 (N.D. Ohio May 15, 2007) (same). *5 1990) (“We agree with the district court that if appellant ‘can avoid the practical consequences of an agreement to arbitrate by naming nonsignatory 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.'...We therefore will follow the well-settled principle affording agents the benefits of arbitration agreements made by their principal and affirm the district court's decision on this issue.”) (citation omitted). C. Availability of Class Arbitration The Royalty Owners dispute Defendants' claim that the Federal Arbitration Act (“FAA”) applies in this action, contending that Ohio law applies instead. Opposition, ECF No. 17 at PageID #: 344–49. They assert that even if Defendants can compel arbitration, under Ohio law, they cannot compel individual arbitration. Id. at PageID #: 354. (i) Applicable Law “The FAA applies to ‘[a] written provision in any...contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction....’ ” Stutler v. T.K. Constructors Inc., 448 F.3d 343, 345 (6th Cir. 2006) (quoting 9 U.S.C. § 2). The Royalty Owners contend that the FAA's interstate commerce requirement is not met in this case. Specifically, they state, This case does not concern commerce. It concerns the theft and conversion of royalties sitting immobile in a bank account....The result is no different if one looks beyond the bank account to the lease that generated the misappropriated royalties deposited here. This is because Chesapeake Exploration sells the gas the instant it leaves the ground, before there is even intrastate commerce, much less interstate commerce. Opposition, ECF No. 17 at PageID #: 344. The U.S. Supreme Court has addressed the scope of the FAA's interstate commerce factor: We have interpreted the term “involving commerce” in the FAA as the functional equivalent of the more familiar term “affecting commerce”-words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power. Because the statute provides for “the enforcement of arbitration agreements within the full reach of the Commerce Clause,” it is perfectly clear that the FAA encompasses a wider range of transactions than those actually “in commerce”-that is, “within the flow of interstate commerce,” .... Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 68 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 ...Congress' Commerce Clause power “may be exercised in individual cases without showing any specific effect upon interstate commerce” if in the aggregate the economic activity in question would represent “a general practice...subject to federal control.” Only that general practice need bear on interstate commerce in a substantial way. Citizens Bank v. Alafabco, Inc. 539 U.S. 52, 56-57 (2003) (citations omitted). A court in the Northern District of New York applied this rubric to a case concerning an oil and gas lease dispute between royalty owners and Chesapeake Appalachia, an affiliate of Defendants and Chesapeake Exploration. Alexander v. Chesapeake Appalachia, LLC, 839 F. Supp. 2d 544 (N.D.N.Y. 2012). Resolving the parties' disagreement as to the applicability of the FAA, the court held, Applying [the] guidelines [set forth in Citizens Bank], the leases here fall within the extent of Congress' Commerce Clause power. Although the oil and gas leases at issue involve real property only in New York, the plaintiff landowners in New York negotiated the subject leases with CAP, an Ohio company and CNR, a Delaware limited liability company. Those leases have since been acquired by Chesapeake, an Oklahoma limited liability company and Statoil, a Delaware corporation. Further, while no drilling has yet been commenced on the properties and thus no gas has been found nor shipped in interstate commerce, the contracts clearly evidence transactions involving interstate commerce. As defendants point out, the leases' primary purpose is the development of gas resources which will ultimately be placed in an interstate pipeline subject to federal regulation....Accordingly, the leases satisfy the FAA's “involving commerce” test and the FAA will be applied. *6 Id. at 550 (emphasis added). Also, resolving a dispute between royalty owners and Chesapeake Appalachia, a court in the Middle District of Pennsylvania has recently held, While the Lease at issue involves real property solely situated in Pennsylvania and the [royalty owners] are Pennsylvania residents, the subject Lease was negotiated with Chesapeake, an Oklahoma company. Even if the gas produced by Chesapeake is sold at the wellhead in Pennsylvania, the Lease is clearly part of a chain of transactions involving interstate commerce for it is well-established that the end use of the natural gas and oil extraction in the Marcellus Shale is not simply contained within Pennsylvania's borders. Accordingly, the Lease satisfies the FAA's “involving commerce” test and the FAA will be applied. Chesapeake Appalachia, L.L.C. v. Ostroski, et al., Case No. 4:16CV00050, Document 36 (M.D. Pa. Aug. 8, 2016). In Ostroski, as in the case at bar, the underlying dispute concerned the calculation of royalties. As can be seen from Alexander and Ostroski, the analysis does not turn on the situs of sale and title transfer. In light of the broad scope of the FAA's interstate commerce factor, the Royalty Owners' position is untenable. The Royalty Owners in this action are residents of Ohio and Texas. See Amended Class Action Complaint, ECF No. 5 ¶¶ 18 –40. Each of the Royalty Owners either entered into their Lease with Chesapeake Exploration, an Oklahoma company, or their Lease was assigned to Chesapeake Exploration. See id.; Corporate Disclosure Statement in Chesapeake Exploration, L.L.C., v. Henceroth, et al., Case No. 4:16CV00150, ECF No. 2 at PageID #: 145 (stating Chesapeake Exploration's citizenship). Of the Royalty Owners who have received royalty checks, those checks were calculated and issued by Defendants, which are Oklahoma companies. ECF No. 5 ¶¶ 6–7, 41–42. Furthermore, the Royalty Owners have conceded that the Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 69 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 processed natural gas that is the subject of their Leases is ultimately transported “through pipes to the interstate pipeline system.” Id. ¶¶ 58, 109, 120. Construing these uncontested facts against the broad, inclusive scope of the FAA's interstate commerce factor, the Court finds that there is no genuine dispute of material fact that the Leases substantially affect interstate commerce for purposes of the FAA. 6 6 The Court need not find that the Leases are conveyances of real property. See Opposition, ECF No. 17 at PageID #: 351–52 (arguing that oil and gas leases are conveyances of real property, and therefore are not subject to the FAA). The analysis does not turn on this issue. Moreover, the argument is unsupported. The Royalty Owners cite to an Ohio Supreme Court opinion resolving a quiet title action, wherein the Court explains that minerals (such as oil and gas) that underlie the surface of land are realty, see id. at PageID #: 351 (citing Chesapeake Exploration, L.L.C. v. Buell, 144 Ohio St.3d 490, 45 N.E.3d 185 (2015)). The Amended Class Action Complaint, however, makes no mention of mineral rights; only royalty interests are in dispute. See ECF No. 5 at PageID #: 78 –80. And, the Ohio Court of Appeals has unequivocally stated, “A royalty interest is personal property.” Pollock v. Mooney, No. 13 MO 9, 2014 WL 4976073, at *2 ¶ 16 (Ohio Ct. App. Sept. 30, 2014). (ii) Judicial Estoppel *7 The Royalty Owners contend that Defendants are judicially estopped from asserting that the FAA applies. See Opposition, ECF No. 17 at PageID #: 349. The Sixth Circuit has explained the concept of judicial estoppel: “[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.” . . . [I]t is well- established that at a minimum, “a party's later position must be ‘clearly inconsistent’ with its earlier position[ ]” for judicial estoppel to apply[.] Moreover, the doctrine of judicial estoppel “is applied with caution to avoid impinging on the truth-seeking function of the court because the doctrine precludes a contradictory position without examining the truth of either statement.” Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 546 F.3d 752, 757 (6th Cir. 2008) (citations omitted). The Royalty Owners urge application of this principle, stating, [I]n neighboring Pennsylvania, three district court judges have correctly ruled that state arbitration law applies to Chesapeake's oil and gas leases. .... Chesapeake Exploration [ (the signatory to the Leases) ] cannot argue that its oil 1and gas leases evidence a transaction involving intestate commerce, having argued the exact opposite in Riggs, New Hope, Ulmer, Hayes and Stiles. Since Chesapeake Exploration cannot make that argument, Defendants cannot either. Judicial estoppel applies to privies. ECF No. 17 at PageID #: 346, 349. Defendants rebut the Royalty Owners' argument, asserting, [I]n both this case and in all the cases cited by [Royalty Owners]—Riggs, New Hope, Ulmer, Hayes, Eisenberger, and Stiles...Chesapeake's core position has always been that arbitration should be compelled.... In the Riggs and New Hope cases cited by [Royalty Owners], the parties concurred that Ohio law applied to those specific cases based on those specific facts. There was no litigated issue as to whether the FAA or Ohio law should apply, and the court was never asked to rule on the issue. Similarly, in the Ulmer, Hayes, Eisenberger, and Stiles cases cited by Plaintiffs, the parties again concurred that the Pennsylvania Arbitration Act applied in those specific cases based on those specific facts....Again, there was no litigated issue as to whether the FAA or Pennsylvania law should apply. Reply, ECF No. 20 at PageID #: 565. The Royalty Owners have not shown that the applicability of the FAA was actually litigated in the cases they cite. See Thompson v. Davidson Transit Org., 563 F. Supp. 2d Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 70 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 820, 830 (M.D. Tenn. 2008) (“[T]he defendant has cited no case, and the court has found none, where judicial estoppel was applied even though the parties did not litigate the allegedly inconsistent position in the prior proceeding....In fact, the Sixth Circuit seems to require that the ‘first court has adopted the position urged by the party....’ ”) (citation omitted). Nor have they shown that that the application of state law in those cases effected a different outcome than would have resulted under application of the FAA. Lorrilard Tobacco Co., 546 F.3d at 757 (noting that, for judicial estoppel to apply, “a party's later position must be ‘clearly inconsistent’ with its earlier position”) (citation omitted). And, as explained below, the Royalty Owners cannot demonstrate that they would reap a different result under application of Ohio arbitration law. For these reasons, the Court declines to apply the principle of judicial estoppel. *8 The FAA applies to the arbitration provisions of the Leases. (iii) Availability of Class Arbitration under the FAA Decidedly, under the FAA, when an arbitration provision is silent as to the availability of class arbitration, a court may not impose it. See Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 687 (2010) (“We think that the differences between bilateral and class-action arbitration are too great for arbitrators to presume, consistent with their limited powers under the FAA, that the parties' mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings.”); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 599-600 (6th Cir. 2013) (“The principal reason to conclude that this arbitration clause does not authorize classwide arbitration is that the clause nowhere mentions it. ...[T]he absence of a class-action right does not render an arbitration agreement unenforceable.”); Huffman v. Hilltop Cos., LLC, 747 F.3d 391, 398-99 (6th Cir. 2014) (“As was also the case in Reed Elsevier, here the parties' arbitration clause nowhere mentions classwide arbitration. We therefore conclude that the arbitration clause does not authorize classwide arbitration, and hold that the plaintiffs must proceed individually.”) (citation omitted). The Royalty Owners concede that the arbitration provisions in this case are silent as to class arbitration. See, e.g., Opposition, ECF No. 17 at PageID #: 354 (“The fact that the arbitration provisions in the leases in this case are silent as to class arbitration does not prevent the claims in this action from proceeding on a class basis....”). Therefore, applying the FAA, the Court finds that the arbitration clauses in the Leases do not authorize classwide arbitration. (iv) Availability of Class Arbitration under Ohio Law Even if the Court were to find that Ohio arbitration law applies instead of the FAA, it does not appear that the outcome would be any different. While the Royalty Owners insist that “Ohio recognizes class arbitration even [if] the contract is silent as to class arbitration,” Opposition, ECF No. 17 at PageID #: 354, Ohio appellate courts have not directly addressed the issue. As such, this Court is tasked with forecasting how the Ohio courts would rule. See Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454 (6th Cir. 2001) (“If the state supreme court has not yet addressed the issue presented, we must predict how the court would rule by looking to all the available data.”). Asserting that Ohio courts would mandate class arbitration in the face of silence, the Royalty Owners cite to two Ohio Court of Appeals decisions, wherein the court found class arbitration waivers to be unconscionable. See Opposition, ECF No. 17 at PageID #: 355 (citing Eagle v. Fred Martin Co., 809 N.E.2d 1161 (Ohio Ct. App. 2004), and Rude v. NUCO Educ. Corp., No. 25549, 2011 -Ohio- 6789, 2011 WL 6931516 (Ohio Ct. App. Dec. 30, 2011)). The Royalty Owners reason, if “a case may proceed as a class arbitration even when the contract attempts to preclude class arbitration,” it may certainly do so when the contract is silent as to class arbitration. Id. at PageID #: 354–55. *9 The Royalty Owners' argument is unavailing. In the cases they cite, the Ohio Court of Appeals found the class arbitration waivers unconscionable based on the particular circumstances of each case. See, e.g., Eagle, 809 N.E.2d at 169 ¶ 45 (noting that “in consumer transactions, and especially those involving necessities such as automobiles...closer scrutiny is necessary for the preservation of the protections afforded consumers through legislation such as the [Consumer Sales Practices Act] ); Rude, 2011 WL 6931516 at *4 ¶ 12 (noting that the arbitration provision was embedded in a contract of adhesion that evidenced a consumer transaction for the provision of educational services). Those facts are not sufficiently analogous to the facts that underlie this action. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 71 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 Additionally, in the case at bar, the question before the Court does not concern explicit class arbitration waivers or unconscionability. The question is whether a party to a contract can be forced to arbitrate on a class basis when the arbitration provision does not address the issue at all. The Royalty Owners' position also does not reflect the current trend of the Ohio Court of Appeals. In more recent cases than Eagle and Rude, the Ohio Court of Appeals adopted the Sixth Circuit's position on a closely related question of class arbitration—whether a court or an arbitrator decides whether class arbitration is available. See, e.g., Bachrach v. Cornwell Quality Tools Co., Inc., No. 27113, 2014 WL 7454687, at *4 ¶¶ 13-14 (Ohio Ct. App. Dec. 31, 2014); Shakoor, et al. v. VXI Global Solutions, Inc., No. 14 MA 59, 35 N.E.3d 539, 546–47 ¶¶ 34–36 (Ohio Ct. App. June 16, 2015). In Bachrach, the Ohio Court of Appeals held, After a review of the relevant case law, we are persuaded by the rationale of the Sixth Circuit as stated in Reed Elsevier, Inc. While not directly addressing the issue presented here, the United States Supreme Court, “characterized the differences between bilateral and classwide arbitration as ‘fundamental.’ ” Id. at 598, quoting Stolt–Nielsen, 559 U.S. at 686. Because the issue of whether the dispute may be arbitrated as a class is “fundamental to the manner in which the parties will resolve their dispute,” the issue is more aligned with a threshold matter and must be decided by the court, absent an agreement to the contrary. Id. at 598–599. 2014 WL 7454687, at *4 ¶¶ 13–14. The Court maintained this position in Shakoor, holding, The Sixth Circuit has clearly stated that [class arbitration] is a gateway issue and provided two reasons for such conclusion. First, it cited the language in Stolt– Nielsen, that it cannot be presumed that the parties consented to class arbitration simply by agreeing to submit their dispute to an arbitrator. [Reed Elsevier, Inc.], 734 F.3d at 598. Second, it referenced the differences between bilateral and class arbitration that were discussed in Stolt–Nielsen. Id. The court concluded that the question of whether the parties agreed to class arbitration is “vastly more consequential than even the gateway question of whether they agreed to arbitrate bilaterally.” Id. at 599. It then reasoned that “[a]n incorrect answer in favor of classwide arbitration would ‘forc[e] parties to arbitrate’ not merely a single ‘matter that they may well not have agreed to arbitrate[,]’ but thousands of them.” Id. .... ...Considering all the above, we are in agreement with our sister district's decision in Bachrach which adopted the Federal Sixth Circuit Court of Appeal's decision in [Reed Elsevier, Inc.] that class arbitration is an issue for the judiciary, unless the agreement specifies otherwise. 35 N.E.3d at 546–47 ¶¶ 34–36. In Bachrach and Shakoor, the Ohio Court of Appeals cited the U.S. Supreme Court's and Sixth Circuit's recognition of the fundamental differences between bilateral and class-wide arbitration. Aligning with that perspective, the Ohio Court of Appeals agreed that when an arbitration provision is silent as to who decides whether class arbitration is available, that determination must be left to the judiciary. Considering the analysis set forth by the Ohio Court of Appeals in resolving that related question, the Court is persuaded that Ohio courts would also agree that the differences between class and bilateral arbitration are too great to require class arbitration when an arbitration provision is silent on the issue. *10 Accordingly, the Court finds that whether the FAA or Ohio law applies, the same result is reached: Defendants may compel individual arbitration. III. Motion to Stay Defendants move the Court to stay the case as to the Royalty Owners whose Leases include an arbitration provision, arguing that the FAA requires it. Brief in Support, ECF No. 15-1 at PageID #: 177. They also move the Court to temporarily stay the case as to all remaining Royalty Owners, for purposes of judicial economy and efficiency, until the Court resolves the Motion for Summary Judgment at ECF No. 17 in Chesapeake Exploration, L.L.C. v. Henceroth, et al., Case No. 4:16CV00150 (N.D. Ohio); and the Motion to Dismiss at ECF No. 9 in Henceroth, et al. v. Chesapeake Exploration, LLC, Case No. 4:15CV02591 (N.D. Ohio). Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 72 of 136 Fellowship v. Chesapeake Energy Corporation, Slip Copy (2016) 2016 WL 5661607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 Id. at PageID #: 177–80. The Royalty Owners urge that the Court should not stay the case as to the ten Royalty Owners whose Leases do not include arbitration provisions, asserting that their claims do not affect and are not affected by the related litigation. See Opposition, ECF No. 17 at PageID #: 356. Upon a party's request, the Court is required to stay any action that it finds is referable to arbitration under the FAA. See 9 U.S.C. § 3 (“[T]he court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, 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....”) (emphasis added); Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 625 (2009) (“Section 3 of the [FAA] entitles litigants in federal court to a stay of any action that is ‘referable to arbitration under an agreement in writing.'...a litigant who was not a party to the relevant arbitration agreement may invoke § 3 if the relevant state contract law allows him to enforce the agreement.”) (emphasis added). In accordance with its findings herein, the Court grants Defendants' motion to stay the case as to the Royalty Owners whose Leases include an arbitration provision. The Court also has inherent authority to stay cases. See F.T.C. v. E.M.A. Nationwide, Inc., 767 F.3d 611, 626– 27 (6th Cir. 2014) (quoting Ohio Envtl. Council v. U.S. Dist. Court, S. Dist. of Ohio, E. Div., 565 F.2d 393, 396 (6th Cir.1977)) (“ ‘The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes in its docket with economy of time and effort for itself, for counsel and for litigants, and the entry of such an order ordinarily rests with the sound discretion of the District Court.’ ”). The facts, parties, and counsel in this litigation and the related litigation significantly overlap. The Court is not persuaded that the disposition of the related litigation does not affect the claims of the Royalty Owners in this case. The Court, therefore, exercises its discretion to stay the case as to the Royalty Owners whose Leases do not contain arbitration provisions. IV. Conclusion For the foregoing reasons, Defendants' Motion to Compel Individual Arbitration and Motion to Stay, ECF No. 15, are granted. *11 IT IS SO ORDERED. September 29, 2016 /s/ Benita Y. Pearson Date Benita Y. Pearson United States District Judge All Citations Slip Copy, 2016 WL 5661607 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 73 of 136 I Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 74 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2013 WL 6191739 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Michael L. LEIGHTON and Nancy A. Leighton, Plaintiffs v. CHESAPEAKE APPALACHIA, LLC, et al., Defendants. Civil No. 1:13–CV–2018. | Nov. 26, 2013. Attorneys and Law Firms Tate J. Kunkle, Napoli Bern Ripka & Associates LLP, W. Steven Berman, New York, NY, William S. Berman, Napoli Bern Ripka, LLP, Marlton, NJ, for Plaintiffs. Jesse R. Pierce, Nugent D. Beaty, Jr., Pierce & O'Neill, LLP, Houston, TX, Daniel T. Brier, Myers Brier & Kelly, LLP, Scranton, PA, for Defendants. MEMORANDUM WILLIAM W. CALDWELL, District Judge. I. Introduction *1 Plaintiffs, Michael L. Leighton and Nancy A. Leighton, filed this suit in state court, seeking damages and declaratory relief arising from Defendants' natural-gas drilling operations near Plaintiffs' property, operations commonly known as “fracking.” Defendants removed the case here on the basis of diversity jurisdiction. Defendants are Chesapeake Appalachia, LLC (“Chesapeake Appalachia”); Chesapeake Energy Corporation (“Chesapeake Energy”); Nomac Drilling, LLC; and Schlumberger Technology Corporation. 1 1 Defendants say that Plaintiffs incorrectly identified Schlumberger Technology Corporation as “Schlumberger Technology Corporation d/b/a/ Schlumberger Well Services.” (Defs.' Mot. n. 2). Plaintiffs leased their land to Chesapeake Appalachia for the purpose of extracting the natural gas, and the Lease has an arbitration clause. We are considering Defendants' motion to compel arbitration and to stay the case while the arbitration proceeds. One of the issues presented is whether defendants, Chesapeake Energy, Nomac, and Schlumberger, as nonsignatories to the Lease, can require the signatory plaintiffs to arbitrate the claims they have against these defendants. II. Standard of Review The parties rely on different standards of review in arguing the merits of the motion to compel. Defendants contend they can establish their right to arbitrate Plaintiffs' claims by the allegations of the complaint and the provisions of the Lease. They therefore bring their motion to compel under Fed.R.Civ.P. 12(b) (6). Rule 12(b)(6) deals with the legal sufficiency of the complaint by focusing on its factual allegations and, as relevant here, examining the Lease, because Plaintiffs' complaint contains a breach-ofcontract claim based on that document. Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764, 772 (3d Cir.2013) (on a Rule 12(b)(6) motion, the court looks at the complaint and authentic documents if the claims are based on those documents). On the other hand, Plaintiffs maintain the motion should be evaluated under Fed.R.Civ.P. 56, which deals with motions for summary judgment and allows consideration of evidence that goes beyond the pleadings and supporting documents. Id. (citing Rule 56(c)). Guidotti tells us how to proceed. First, if the defendants can satisfy the Rule 12(b)(6) standard, then the parties should be sent to arbitration without further proceedings. Guidotti, 716 F.3d at 773–74. However, “if the complaint and its supporting documents are unclear regarding the agreement to arbitrate,” id. at 776, the motion to compel must be denied pending development of a factual record. Id. at 774. Similarly, even if “the complaint and incorporated documents facially establish arbitrability,” id., if the plaintiff, in opposing the motion, presents evidence “sufficient to place the agreement to arbitrate in issue,” id. at 776, the motion to compel should not be granted. Id. at 774. At that point, the parties are entitled to discovery on the question of arbitrability, id. at 776, and the issue should be decided under the Rule 56 summary- judgment standard, not the motion-to-dismiss standard. Id. at 774. *2 We thus start with the standard of review for a Rule 12(b)(6) motion. Under Rule 12(b)(6), “[w]e ‘accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 75 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.’ ” Byers v. Intuit, Inc., 600 F.3d 286, 291 (3d Cir.2010) (quoted case omitted). As noted, this inquiry also includes examining the Lease because Plaintiffs base their breach-of-contract claim on the Lease. With this standard in mind, we set forth the background to this litigation, as Plaintiffs allege it. III. Background Plaintiffs are the owners of real property located in Granville Summit, Bradford County, Pennsylvania (the “Property”). (Compl.¶ 2). On August 15, 2008, they entered into an “Oil & Gas Lease” with defendant Chesapeake Appalachia so that Chesapeake Appalachia could “obtain the legal right to drill on or near Plaintiffs' Property and extract natural gas from Plaintiffs' Property.” (Id.). The Lease was for a five-year term, beginning on August 15, 2008. (Doc. 19–1, ECF p. 3, Lease, Ex. A to Defs.' Motion). It contained the following pertinent provisions. (Each plaintiff is the “Lessor” and Chesapeake Appalachia is the “Lessee.”) First, the Lease allowed Chesapeake Appalachia to search and drill for natural gas on Plaintiff's Property: Leasing Clause. Lessor hereby leases exclusively to Lessee all the oil and gas ... underlying the land herein leased, together with such exclusive rights as may be necessary or convenient for Lessor, 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, plug, abandon, and remove wells; ... (Id.). An Addendum to the Lease required Chesapeake Appalachia to correct any damage to Plaintiffs' water supply. The Addendum's “Water Damage Clause” provided as follows: In the event any activity carried on by Lessee pursuant to the terms of this lease damages, disturbs, or injures Lessor's potable water well or source located on these leased premises, Lessee shall at its sole cost and expense use its best efforts to correct any such damage, disturbance or injury. (Id., ECF p. 6). Finally, the Lease contained an arbitration clause, providing: Arbitration. In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee'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 Lessor and Lessee. (Id., ECF p. 4). *3 Plaintiffs allege that Chesapeake Appalachia and Nomac are “wholly owned and operated subsidiaries and/ or divisions of Defendant Chesapeake Energy.” (Compl.¶ 14). Defendant Schlumberger is a Texas corporation. (Id. ¶ 22). Chesapeake Appalachia, Nomac and Chesapeake Energy engage in “fracking” or “hydraulic fracking” activity, which includes drilling, building and operating wells, and producing, processing and transporting natural gas. (Id. ¶ 18). Schlumberger engages “in the business of providing an array of fracking-related natural gas well services to oil and gas drillers across the United States,” including Chesapeake Appalachia, Nomac and Chesapeake Energy. (Id . ¶ 25). Chesapeake Appalachia owned two wells, the Morse 3H Gas Well, and the Morse 5H Gas Well, (id. ¶ 16), which were “in close proximity” to the Property, (id. ¶ 48), located about one-half mile from Plaintiffs' residence and water supply well. (Id. ¶ 35). Chesapeake Appalachia and Chesapeake Energy owned, designed, constructed and operated the wells. (Id. ¶¶ 36 and 37). Nomac “carried out fracking related drilling, cementing, perforating, squeezing and other well servicing activities at the Wells.” (Id. ¶ 38). Schlumberger “carried out drilling, cementing, perforating, squeezing and other fracking- related well servicing activities at the Wells.” (Id. ¶ 39). Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 76 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 In or about July 2010, Defendants 2 began constructing the wells and continued their construction through November 2011. (Id . ¶¶ 42 and 49). In November 2011, Defendants, either individually or jointly, “conducted remedial perforations and cement squeeze operations” on the Morse 5H well. (Id. ¶ 50). In May 2012, Defendants, either individually or jointly, were performing remedial activities at the Morse 5H well when “squeeze perforations ... were exposed to formation pressures, allowing contaminants ... to escape from the well bore for as many as 7 days.” (Id. ¶ 51). The remedial activities were required because Defendants had negligently constructed the wells. (Id. ¶ 52). The construction violated industry standards. (Id. ¶ 53). 2 “Defendants” refers to all four defendants. (Compl.¶ 29). Before the gas wells were drilled, “on or about May 25, 2011, defendant Chesapeake Appalachia conducted pre-drill sampling of Plaintiffs' water supply.” (Id. ¶ 46). The sampling showed Plaintiffs' water supply to be of good quality. (Id. ¶ 47). In May 2012, following the escape of contaminants, the Pennsylvania Department of Environmental Protection and Chesapeake Appalachia took groundwater samples from the Property. (Id. ¶¶ 54 and 58). The samples showed substantial increases in the levels of methane, ethane, propane, iron, and manganese. (Id. ¶¶ 57–63). The groundwater located at the Property had also “drastically changed in clarity and color, it had a foul odor and contained noticeable levels of natural gas.” (Id. ¶ 55). Additionally, “[w]ater drawn from Plaintiffs' groundwater supplies had also become flammable and surface water running through the creek on [the] Property had begun bubbling.” Id. 3 3 Chesapeake Appalachia attempted some remedial measures. In or about June 2012, it installed a temporary water treatment system that made the water safe for residential uses, “but not for drinking.” (Id. ¶ 67). In or about June 2012, it installed a “sub-slab air insertion system into Plaintiffs' basement to keep the natural gas from infiltrating Plaintiffs' Property at dangerous and explosive levels.” (Id. ¶ 68). *4 The complaint presents eight causes of action. In the first seven, all Defendants are named. The first cause of action alleges Defendants violated the Pennsylvania Hazardous Sites Cleanup Act (HSCA), 35 Pa. Stat. Ann. § 6020.101 et seq., by “caus[ing] the spill, release and/or discharge of ‘hazardous substances' “ as defined in the HSCA. (Compl.¶ 78). The second cause of action alleges negligence in the manner in which Defendants drilled, owned, and operated the wells. The third cause of action alleges negligence per se because Defendants violated several Pennsylvania statutes and regulations applicable to their activity. The fourth cause of action alleges private nuisance. The fifth cause of action alleges strict liability for abnormally dangerous and ultra-hazardous activities. The sixth cause of action alleges trespass. The seventh cause of action alleges a claim for “inconvenience and discomfort.” The eighth cause of action is for breach of contract and names only Chesapeake Appalachia. Plaintiffs allege Chesapeake Appalachia breached the Lease in the following ways: (1) it failed to drill, construct and install the wells to minimize effects on the Property; (2) it failed to restore the Property and water supply to their pre-drilling condition; and (3) it failed to conduct its operations in accordance with the laws of Pennsylvania and regulations promulgated by the Pennsylvania Department of Environmental Protection. In their prayer for relief, Plaintiffs seek damages in the form of the costs of remediating the Property, other compensatory damages, punitive damages, and an injunction requiring Defendants to stop the activity that was contaminating the Property. IV. Discussion A. The Scope of the Arbitration Clause Covers Plaintiffs' Claims Under either federal or state law, arbitration will be required if: (1) there is a valid agreement to arbitrate; and (2) the dispute comes within the scope of the agreement. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir.2009); Pisano v. Extendicare Homes, Inc., 77 A.3d 651, ––––, 2013 WL 4046673, at *2 (Pa.Super.Ct.2013). 4 4 Defendants assert that no decision has to be made about whether the Federal Arbitration Act, 9 U.S.C. §§ 1–16, or state arbitration law controls because the law is the same. Plaintiffs cite both federal and state cases. In these circumstances, we also make no decision as to which law controls. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 77 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Plaintiffs do not argue there is no agreement to arbitrate (at least as to Chesapeake Appalachia, a signatory to the Lease) but do dispute that their claims come within the scope of the agreement. Defendants argue that the arbitration clause covers the Plaintiff's claims because it is expansive, requiring arbitration of disputes “concerning this Lease,” “performance” under the Lease, or “damages caused by Lessee's operations.” Defendants argue that Plaintiffs' claims fall within these provisions since all of them arise from Chesapeake Appalachia's operations authorized by the Lease. As further support, they note that under federal and state law, courts will find that a dispute comes within the scope of an arbitration clause “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Century Indem. Co. v. Certain Underwriters at Lloyds, 584 F.3d 513, 524 (3d Cir.2009) (quoted Supreme Court case omitted). See also Callan v. Oxford Land Dev., Inc., 858 A.2d 1229, 1233 (Pa.Super.Ct.2004). *5 We agree with Defendants that Plaintiffs' claims are within the scope of the arbitration agreement. As they assert, the clause covers disagreements broadly worded to include disagreements about performance under the Lease and Chesapeake Appalachia's operations. See Roman v. Chesapeake Appalachia, LLC, No. 11–CV–1614, 2012 WL 2076846, at *4 (M.D. Pa. June 28, 2012) (observing that the same arbitration clause was broadly written, although dealing with a different type of claim). We add that the clause requires arbitration of “all such disputes.” Since Plaintiffs' claims are based on Defendants' drilling activities, they come within the scope of the arbitration clause, as either disputing Defendants' performance or damages resulting from their operations. In reaching this conclusion, we recognize that Plaintiffs rely on language in Pennsylvania cases saying that “arbitration agreements are to be strictly construed and such agreements should not be extended by implication.” Pisano, supra, 2013 WL 4046673, at *9. The Pennsylvania Superior Court has acknowledged that this language is in “tension” with the language we quoted above, that a dispute should be construed as being covered by the arbitration agreement unless it can be “said with positive assurance” that it is not. The superior court said the solution is to look to state law on contract construction and to interpret the clause to give effect to the parties' intent as manifested by the contractual language. Callan, supra, 858 A.2d at 1233. Here, the contractual language establishes that Plaintiffs' claims are covered by the arbitration clause. Cf. Callan, 858 A.2d at 1233 (in sending a case to arbitration, noting that “ ‘all’ contract disputes does mean ‘all’ contract disputes”). The result is the same under federal law. “The FAA instructs courts to refer to principles of applicable state law when determining the existence and scope of an agreement to arbitrate.” Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir.2005). “Under Pennsylvania law ... the scope of [an] arbitration [agreement] ‘is determined by the intention of the parties as ascertained in accordance with the rules governing contracts generally.’ ” State Farm Mut. Auto. Ins. Co. v. Coviello, 233 F.3d 710, 716 (3d Cir.2000) (quoted case omitted). Plaintiffs make the following arguments that their claims are not within the scope of the arbitration clause. First, they argue that the Lease “is simply an instrument that created an agreement between the Plaintiff and defendant Chesapeake Appalachia and outlined responsibilities of each party to the other,” (Doc. 20, ECF p. 7, Pls.' Opp'n Brief), while their claims “fall well outside the parameters of the Lease” and are “extraneous” to it. (Id.). This argument fails because it just says in another way that the Lease is a contract, but without acknowledging that it contains an arbitration clause which also governs the relationship between the parties. *6 Second, Plaintiffs argue that the arbitration agreement is inapplicable because the damages did not arise from activities performed on the Property. Instead, the damages arose from wells on land in close proximity to the Property, but not on it. They principally rely on Armstrong v. Chesapeake Appalachia, LLC, No. 10–CV– 0681, (Pa. Common Pleas Ct.—Bradford Cnty. June 27, 2012) (unpublished disposition), in support. 5 5 Armstrong is attached to Plaintiffs' opposition brief as Ex. A. In Armstrong, as here, the plaintiffs were suing Chesapeake Appalachia for damage to their property from the defendant's natural-gas drilling operations on land adjoining the property. Chesapeake Appalachia moved to compel arbitration based on a clause materially Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 78 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 identical to the one in the instant case. Denying the motion, the court said that the lease was intended to apply only “to operations involving a gas well drilling on [the plaintiff's] property.” (Doc. 21–1, ECF p. 4). Armstrong is distinguishable. The plaintiffs there brought only tort claims. Here, in contrast, Plaintiffs have, in addition to tort claims, sued for breach of the Lease. In doing so, they have alleged that their Property and water supply were damaged by Defendants' operations on nearby land. Thus Plaintiffs have themselves alleged that the Lease applies to activities on adjoining land. 6 6 This position is supported by the language of the Lease itself which gives Chesapeake Appalachia the right, among other things, to “explore, develop, produce, measure, and market production from the [Property], and from adjoining lands.” (Doc. 19–1, ECF p. 3) (emphasis added). Again relying on Armstrong, Plaintiffs argue the arbitration clause does not apply to their claims because the clause was intended to apply to disagreements between the parties in their capacities as lessor and lessee. As the court in Armstrong reasoned: [T]he 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 Plaintiffs' claims, sounding in trespass, would be viable in the absence of a lease. The lease is wholly incidental to the alleged causes of action. (Doc. 21–1, ECF P. p. 4). We disagree with this reasoning. The court does not explain why the tort claims are not disagreements that have arisen between the parties in their capacities as lessor and lessee. The court is essentially saying that the arbitration clause cannot cover tort claims. But an arbitration clause can cover such claims. See Roman, supra, 2012 WL 2076846, at *4; Callan, supra, 858 A.2d at 1233. Having decided that the claims come within the scope of the arbitration clause, we turn to the parties' arguments on whether Defendants can enforce the clause against Plaintiffs. B. Enforceability of the Arbitration Clause All the defendants move to compel Plaintiffs to arbitrate their claims even though only Chesapeake Appalachia is a signatory to the Lease. The nonsignatory defendants, Chesapeake Energy, Nomac, and Schlumberger, assert they can require Plaintiffs to arbitrate based on theories of agency and equitable estoppel. Before we get to Defendants' arguments, however, we will address Plaintiffs' position that none of Defendants can insist on arbitration, even Chesapeake Appalachia, because “arbitration clauses are not enforced ‘when, as here, a plaintiff also has claims arising from the same set of facts against several defendants who are not bound by an arbitration agreement,’ ” (Doc. 20, ECF p. 10, Pls.' Opp'n Br.). This is a quotation from the undersigned's opinion in Scott v. LTS Builders LLC, No. 10–CV–0581, 2011 WL 6294490, at *5 (M.D.Pa. Dec. 5, 2011) (Caldwell, J.). If Scott applies here, we need not address Defendants' reliance on agency or equitable estoppel. We can deny the motion to arbitrate, even as to the signatory Chesapeake Appalachia. *7 Scott does not apply here. In Scott, we denied a motion to compel arbitration, but the facts were materially different. Only one defendant, the signatory to the arbitration agreement, sought arbitration, and there were ten other defendants, with five of those insisting that the claims against them be resolved in court.2011 WL 6294490, at *5. Relying on School District of Philadelphia v. Livingston–Rosenwinkel, P.C., 690 A.2d 1321 (Pa.Commw.Ct.1997), we ruled that sending the case against the signatory to arbitration would not satisfy Pennsylvania's public policy of enforcing arbitration agreements “as a means of promoting swift and orderly disposition of claims” Id. (quoting Livingston– Rosenwinkel, 690 A.2d at 1322–23). As that case noted, it would result in litigating the same claims twice and in a “ ‘protracted, piecemeal disposition of the dispute.’ ” Id. (quoting Livingston–Rosenwinkel, 690 A.2d at 1323). Here, on the other hand, all Defendants are moving for arbitration, so a public policy against duplicative and piecemeal disposition of disputes is not implicated. We thus turn to Defendants' arguments for arbitration. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 79 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 1. Agency–Type Relationship It is apparent that Chesapeake Appalachia as a signatory to the arbitration agreement can enforce it against Plaintiffs. Defendants argue that the nonsignatories to the arbitration agreement can also enforce it because Plaintiffs allege the nonsignatory defendants were the agents of Chesapeake Appalachia, carrying out the latter's obligations under the Lease. Defendants cite in support Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir.1993); Amato v. KPMG LLP, 433 F.Supp.2d 460 (M.D.Pa.2006); and Weiner v. Pritzker, 2001 WL 1807929 (Pa. Common Pleas Ct.—Phila. Cnty.). In making this argument, Defendants rely on “traditional agency theory,” Pritzker, 7 F.3d at 1121, as in material part they quote in support of their argument the following language from Pritzker: “Because a principal is bound under the terms of a valid arbitration agreement, its agents, employees, and representatives are also covered under the terms of such agreements.” Id. We do not believe that Plaintiffs have alleged that the nonsignatory defendants are agents of Chesapeake Appalachia in connection with the latter's natural-gas operations. However, another portion of Pritzker does support Chesapeake Energy's and Nomac's right to arbitrate Plaintiffs' claims against them. 7 7 Since Chesapeake Energy and Nomac can compel arbitration, we only state why the allegations about Schlumberger do not establish it was Chesapeake Appalachia's agent. One of the elements of agency is the principal's control of the undertaking. Walton v. Johnson, 66 A.3d 782, 787 (Pa.Super.Ct.2013). Plaintiffs' allegations are insufficient to establish that Chesapeake Appalachia controlled Schlumberger. In Pritzker, the plaintiff trustees of a pension plan had entered into cash management agreements with Merrill Lynch, Pierce, Fenner & Smith, Inc. (MLPF & S). The agreements contained arbitration clauses. 7 F.3d at 1112. Belinda P. Stewart, a financial consultant employed by MLPF & S, advised about, and made, purchases for the plan. Id. Merrill Lynch Asset Management, Inc. (MLAM) was the custodian of the assets. Id. at 1113. MLAM and MLPF & S were wholly-owned subsidiaries of Merrill Lynch & Co., Inc. Id. at 1112. The trustees sued over Stewart's unauthorized purchase of certain assets for the plan. Id. at 1112. Defendants moved to compel arbitration. In relevant part, the Third Circuit ruled that the trustees had to arbitrate their claims against Stewart because as an employee of MLPF & S she was an agent of the company and hence bound by the arbitration clause in the agreements “[u]nder traditional agency theory.” Id. at 1121. *8 In regard to MLAM, the court of appeals ruled that “analogous reasons” supported arbitration of the claims against it, describing MLAM as the “corporate sister of MLPF & S.” Id. at 1122. It was significant that MLAM had to perform certain services in connection with the accounts and that it and MLPF & S were subsidiaries of Merrill Lynch & Co., Inc. Id. Citing Isidor Palewonsky Associates, Inc. v. Sharp Properties, Inc., 998 F.2d 145 (3d Cir.1993), the court stated “that arbitration agreements may be upheld against non-parties where the interests of such parties are directly related to, if not congruent with, those of a signatory.” Pritzker, 7 F.3d at 1122. It then concluded that the claims against MLAM had to go to arbitration because the trustees' “own theory of liability demonstrate[d] that MLAM's interests are directly related to, if not predicated upon, MLPF & S' conduct.” Id. at 1122. The court of appeals summarized as follows: “Where the parties to [a valid 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.” Id. at 1122. Pritzker indicates that Chesapeake Energy and Nomac can enforce the arbitration agreement against Plaintiffs. Plaintiffs allege that Chesapeake Appalachia and Nomac are “wholly owned and operated subsidiaries and/or divisions of Defendant Chesapeake Energy.” (Compl.¶ 14). 8 Chesapeake Appalachia, Chesapeake Energy and Nomac are thus related entities. 9 Additionally, since Chesapeake Energy and Nomac are alleged to have engaged in the conduct with Chesapeake Appalachia that damaged Plaintiffs' Property, their interests are directly related to those of Chesapeake Appalachia, the signatory. It follows that Chesapeake Energy and Nomac, as nonsignatories, can enforce the arbitration agreement against the plaintiff signatories. 8 Defendant Schlumberger is alleged to be a Texas corporation. (Id. ¶ 22). Plaintiffs do not allege any relationship to the other defendants. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 80 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 9 We note that Defendants' “Corporate Disclosures” are consistent with Plaintiffs' allegations except that none of the entities is a division of any other. Defendants affirm that Chesapeake Appalachia is a wholly-owned subsidiary of Chesapeake Energy. Nomac is “ultimately owned by Chesapeake Operating, Inc., a wholly-owned subsidiary” of Chesapeake Energy. (Doc. 25). 2. Equitable Estoppel Since Defendants have not established that Plaintiffs must arbitrate their claims against Schlumberger under an agency theory, we address their argument based on equitable estoppel. Defendants argue that equitable estoppel requires Plaintiffs to arbitrate their claims against them. Nonsignatories to an arbitration agreement can rely on equitable estoppel to compel signatories to arbitrate. Miron v. BDO Seidman, LLP, 342 F.Supp.2d 324, 333 (E.D.Pa.2004). 10 10 In E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, SAS, 269 F.3d 187, 201– 02 (3d Cir.2001), the Third Circuit observed that the doctrine existed but did not apply it there because a signatory was attempting to use it to compel a nonsignatory to arbitrate, when the doctrine only applies in the opposite circumstances. In the instant case, Defendants rely on Bannett v. Hankin, 331 F.Supp.2d 354 (E.D.Pa.2004). Bannett contains the following language concerning estoppel of a signatory: [N]onsignatories to an arbitration agreement have standing to compel arbitration against a signatory and the signatory is estopped from avoiding arbitration with a nonsignatory when the issues which the nonsignatory wants to resolve are intertwined with the agreement that the signatory signed. [citations omitted]. This theory applies when a signatory to the written agreement must rely on the terms of the agreement to assert its claims against the nonsignatory such that the signatory's claims make reference to or presume the existence of the written agreement, or the signatory's claims arise out of and relate directly to the written agreement. [citations omitted]. *9 Id. at 359–60 (brackets added) (footnote omitted). Defendants argue that this standard is satisfied here because Plaintiffs allege the nonsignatory defendants' conduct was pursuant to the Lease and that they were acting jointly with Chesapeake Appalachia, a signatory to the Lease. According to Defendants, this makes the issues presented in this case intertwined with the Lease and directly related to the Lease. Thus, Plaintiffs are estopped from not honoring their commitment to arbitrate. We disagree. A fuller presentation of the standard to be employed can be found in In re: Humana Inc. Managed Care Litigation, 285 F.3d 971 (11th Cir.2002), where the Eleventh Circuit stated that allowing a nonsignatory to compel arbitration under an estoppel theory is based on fairness. Id. at 876. More specifically, estoppel applies when the signatory relies on the agreement containing the arbitration clause to establish his claim against the nonsignatory, and then repudiates the agreement when it would require arbitration. Id. “The plaintiff's actual dependance on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.” Id. See also Miron, supra, 342 F.Supp.2d at 333 (quoting In re Humana ). In the instant case, Plaintiffs are not relying on the Lease to establish their claims against the nonsignatory defendants, Chesapeake Energy, Nomac and Schlumberger. Nowhere in their complaint do they allege that a provision of the Lease entitles them to relief against these defendants. Instead, their claims against these defendants are statutory and common-law ones, claims they can assert against the nonsignatories independently of the Lease. Plaintiffs are alleging a claim for breach of the Lease, but only against Chesapeake Appalachia. Since Plaintiffs are not relying on the provisions of the Lease to make their claims against the nonsignatory defendants, fairness does not dictate that they be estopped from litigating their claims against them in court and requiring them to go to arbitration instead. V. Further Discovery At this point, we should order Plaintiffs to arbitrate their clams against defendants, Chesapeake Appalachia, Chesapeake Energy and Nomac while staying judicial Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 81 of 136 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 proceedings involving Schlumberger. See Amato, supra, 433 F.Supp.2d at 492 (granting stay of judicial proceedings against defendants not subject to arbitration) (citing Berkery v. Cross Country Bank, 256 F.Supp.2d 359, 370 (E.D.Pa.2003)); Sew Clean Drycleaners & Launders, Inc. v. Dress For Success Cleaners, Inc., 903 A.2d 1254, 1258 (Pa.Super.Ct.2006) (under state law a court action against the party not subject to the arbitration agreement should have been stayed pending the resolution of the arbitration proceedings). However, Guidotti instructs us to allow a period of discovery to determine if Defendants can show that Schlumberger was an agent of Chesapeake Appalachia. Guidotti, 716 F.3d at 774. If so, the claims against Schlumberger should also be arbitrated. A period of discovery on whether Chesapeake Energy and Nomac can satisfy a traditional agency status would also be appropriate, as well as discovery on facts that would support whether this case involves interstate commerce and hence that the FAA controls arbitrability of the claims. 11 11 Two of my colleagues have ruled that an oil-and- gas lease is not part of interstate commerce. See Eisenberger v. Chesapeake Appalachia, LLC, No. 09– CV–1415, 2010 WL 457139, at*2 (M.D.Pa. Feb. 4, 2010) (Caputo, J.); Ulmer v. Chesapeake Appalachia, LLC, No. 08–CV–2062 (M.D.Pa. Jan. 16, 2009) (Jones, J.). Other courts disagree. See Sonda v. Chesapeake Appalachia, LLC, No. 12–CV–0103, 2012 WL 5471763, at *2 (N. D.W.Va. Nov. 9, 2012); Heller v. TriEnergy, Inc., No. 12–CV–0045, 2012 WL 2740870, at *11 (N.D.W.Va. July 9, 2012); Alexander v. Chesapeake Appalachia, LLC, 839 F.Supp.2d 544, 550 (N.D.N.Y.2012). *10 We will issue an appropriate order. ORDER AND NOW, this 26th day of November, 2013, it is ORDERED that: 1. Defendants' motion (Doc. 5) to compel arbitration is stayed. 2. The parties are granted ninety (90) days to conduct discovery on the following: (1) whether Schlumberger is an agent of Chesapeake Appalachia under Pennsylvania agency principles; (2) whether Chesapeake Energy and Nomac can also be agents; and (3) whether this case involves interstate commerce. 3. The parties shall thereafter have thirty days to file briefs on the impact of the discovery on the law to be applied and whether the discovery alters our conclusion that Plaintiffs and Chesapeake Appalachia, Chesapeake Energy, and Nomac should proceed to arbitration and that the claims against Schlumberger should be stayed pending resolution of the arbitration proceedings. All Citations Not Reported in F.Supp.2d, 2013 WL 6191739 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 82 of 136 J Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 83 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 10936665 Only the Westlaw citation is currently available. NON–PRECEDENTIAL DECISION— SEE SUPERIOR COURT I.O.P. 65.37 Superior Court of Pennsylvania. Samuel W.B. MILLINGHAUSEN, III, Appellee v. Karen M. DRAKE, Joy A. Capka, Maryann Direnzo, Robert L. Hyslop, Jr., Theresa M. Hyslop, John Does 1–4, and XYZ Corp. Appeal of Karen Drake, Joy Capka Maryann Direnzo, Theresa Hyslop and Robert Hyslop, Appellants. No. 1205 EDA 2013. | Filed April 24, 2014. Appeal from the Order entered March 27, 2013, in the Court of Common Pleas of Montgomery County, Civil Division, at No(s): 2012–06050. BEFORE: ALLEN, JENKINS, and FITZGERALD * , JJ. * Former Justice specially assigned to the Superior Court. MEMORANDUM BY ALLEN, J.: *1 Karen M. Drake, Joy A. Capka, Maryann DiRenzo, and Robert L. and Theresa M. Hyslop, (collectively “Appellants”), appeal from the trial court's order denying Appellants' motion to compel arbitration regarding the defamation claims which were filed against Appellants by their former counsel, Samuel W.B. Millinghausen, III (“Millinghausen”). Appellants further appeal from the trial court's order granting Millinghausen 60 days to conduct discovery for Millinghausen to amend his complaint following the trial court's grant of Appellants' preliminary objections in the nature of a demurrer. After careful consideration, we reverse the trial court's order denying Appellants' motion to compel this matter to arbitration. We are constrained from reaching Appellants' challenge to the trial court's discovery and amendment order because that order is not appealable. The trial court expressed the factual and procedural history of this case as follows: On April 27, 2012, [Millinghausen] filed a complaint in which he alleged the following. [Millinghausen] had a relationship with a legal referral service hereinafter referred to as Legal Access. Legal Access was owned and operated by Robert L. Heston, Jr. The services offered were originally a discounted legal service benefit with a free initial consultation. In 2009, Heston added a prepaid legal service program through his various business entities. Heston arranged with local attorneys to provide these services. [Millinghausen] arranged to become a network attorney for the prepaid legal service program. Between January 2005 and November 24, 2010, Legal Access referred approximately 450 individuals to [Millinghausen] for assistance with legal issues. [Millinghausen] stopped receiving referrals from Legal Access on November 25, 2010. [Millinghausen] called Heston on March 11, 2011 and asked Heston the reason Legal Access had stopped sending referrals to [Millinghausen]. Heston stated that the referrals had stopped because of statements from 4 or more former clients. Heston avoided [Millinghausen's] attempts to have Heston identify the individuals who had made the statements. Heston said he also received information from employer human resources department representatives but did not identify those employers or individuals. [Millinghausen] has lost considerable revenue and income as a result of the false and defamatory statements of the individuals and business entities. [Millinghausen] has reviewed his files and determined the individuals who were most likely to have produced the defamatory statements. [Millinghausen] believed that it is possible that other individuals may be responsible for the defamatory statements but he is unable without discovery to determine the identity of those individuals. [On May 16, 2012, Appellants preliminarily objected to the sufficiency of Millinghausen's complaint and moved to compel this action to arbitration. On June 6, 2012, Millinghausen filed preliminary objections to Appellants' preliminary objections.] *2 By Order docketed March 27, 2013, the trial court entered an Order which (1) overruled [Millinghausen's] preliminary objections to [Appellants'] preliminary Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 84 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 objections; (2) sustained [Appellants'] preliminary objections with respect to the sufficiency of the complaint and granted [Millinghausen] a period of 60 days in which to conduct discovery and file an amended complaint; and (3), overruled [Appellants'] remaining preliminary objections. [Appellants] now appeal to Superior Court. Trial Court Opinion, 8/15/03, at 1–3. Appellants and the trial court have complied with Pa.R.A.P.1925. Appellants present the following issues for our review: 1. Whether the Trial Judge erred as a matter of law and/or abused his discretion in determining that [Millinghausen's] claim was not subject to Arbitration. 2. Whether the Trial Judge erred as a matter of law and/or abused his discretion in determining that he had jurisdiction over this matter despite the Arbitration agreement. 3. Whether the Trial Judge erred as a matter of law and/ or abused his discretion in determining that the dispute was not within the scope of the Arbitration provision. 4. Whether the Trial Judge erred as a matter of law and/ or abused his discretion in permitting [Millinghausen] to amend his complaint when he could not state a claim upon which relief could be granted. 5. Whether the Trial Judge erred as a matter of law and/ or abused his discretion in permitting [Millinghausen] to conduct discovery when his complaint could not state a claim upon which relief could be granted and was subject to Arbitration. 6. Whether the Trial Judge erred as a matter of law and/or abused his discretion in denying Appellants' Preliminary Objections and permitting [Millinghausen] to conduct discovery when his complaint could not state a claim upon which relief could be granted and was subject to Arbitration. Appellants' Brief at 5. Appellants' first, second, and third issues contend that the trial court erred in not compelling this action to arbitration. “As a general rule, an order denying a party's preliminary objections is interlocutory and, thus, not appealable as of right. There exists, however, a narrow exception to this oft-stated rule for cases in which the appeal is taken from an order denying a petition to compel arbitration.” Shadduck v. Christopher J. Kaclik, Inc., 713 A.2d 635, 636 (Pa.Super.1998) (citations omitted). See also 42 Pa.C.S. § 7320(a)(1) (stating appeal may be taken from court order denying application to compel arbitration); Pa.R.A.P. 311(a)(8) (stating appeal may be taken as of right and without reference to Pa.R.A.P. 341(c) from order “which is made appealable by statute or general rule”). * * * We review a trial court's denial of a motion to compel arbitration for an abuse of discretion and to determine whether the trial court's findings are supported by substantial evidence. In doing so, we employ a two- part test to determine whether the trial court should have compelled arbitration. The first determination is whether a valid agreement to arbitrate exists. The second determination is whether the dispute is within the scope of the agreement. *3 Elwyn v. DeLuca, 48 A.3d 457, 460 n. 4, 461 (Pa.Super.2012) (additional internal citations omitted). Here, relative to the existence of a valid agreement to arbitrate between the parties, we recognize that Millinghausen had previously initiated an action against Legal Access for breach of contract arising from the defamatory statements Millinghausen attributes to Appellants. In that action, the trial court denied Legal Access' motion to compel arbitration and granted Millinghausen's motion for pre-trial discovery. In reversing the trial court's order denying arbitration, we observed: [Millinghausen and Legal Access] entered [into] a Network Provider Agreement on January 27, 2006. That agreement provided in section 11 (emphasis added): Arbitration. Any controversy or claim arising out of an alleged breach of this Agreement by either or both parties shall be submitted for settlement to an arbitrator appointed by the American Arbitration Association. The arbitrations shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 85 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 The costs of such arbitration shall be borne by the party against whom the arbitration was rendered. Each party shall bear the costs of its own attorneys' fees in connection with an arbitration unless such costs are otherwise allocated by the arbitrator. Millinghausen v. Legal Access Plans, LLC, 60 A.3d 846 (Pa.Super.2012) (unpublished memorandum) at 10 (internal citation to the record omitted), allocatur denied 64 A.3d 632. We determined: [T]he language in [the arbitration clause in the agreement between Millinghausen and Legal Access] is broad and encompasses any controversy or claim arising from a purported breach of the agreement. [Millinghausen's] position herein is that a wrongful breach occurred in that [Legal Access'] default was premised upon defamation and slander. Nevertheless, nothing more than a breach of the referral agreement is at issue in this matter; hence, it is subject to the broad arbitration clause. Id. at 12–13 (emphasis supplied). Accordingly, we found in Millinghausen that Millinghausen and Legal Access entered into a valid agreement to arbitrate, a conclusion with which the trial court agreed after conducting its own analysis. Trial Court Opinion, 8/15/13, at 4–7 (“It is clear to this court, following a review of the Agreement [between Millinghausen and Legal Access], that a valid arbitration agreement exists.”). We agree with both the Millinghausen panel from our Court and with the trial court. The following principles inform our agreement: (1) arbitration agreements are to be strictly construed and not extended by implication; and (2) when parties have agreed to arbitrate in a clear and unmistakable manner, every reasonable effort should be made to favor the agreement unless it may be said with positive assurance that the arbitration clause involved is not susceptible to an interpretation that covers the asserted dispute. *4 To resolve this tension, courts should apply the rules of contractual constructions, adopting an interpretation that gives paramount importance to the intent of the parties and ascribes the most reasonable, probable, and natural conduct to the parties. 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. Where a contract dispute arises between parties to a contract containing an unlimited arbitration clause, the parties must resolve their dispute through arbitration. Unless the parties impose some limitation on the arbitrator's authority, the arbitrator may decide all matters necessary to dispose of any disputed claims subject to arbitration, and the court may not impose any restrictions sua sponte. Accordingly, “all” contract disputes does mean “all” contract disputes unless otherwise agreed by the parties. Callan v. Oxford Land Development, Inc., 858 A.2d 1229, 1233 (Pa.Super.2004) (internal citations and quotation marks omitted). We must next determine whether the arbitration agreement between Millinghausen and Legal Access can be invoked by Appellants, who were not signatories of the agreement. In determining that a non-signatory to an arbitration agreement should not be compelled to arbitration, we recently expressed: Arbitration is a matter of contract, and parties to a contract cannot be compelled to arbitrate a given issue absent an agreement between them to arbitrate that issue. Even though it is now the policy of the law to favor settlement of disputes by arbitration and to promote the swift and orderly disposition of claims, arbitration agreements are to be strictly construed and such agreements should not be extended by implication. In general, only parties to an arbitration agreement are subject to arbitration. Pisano v. Extendicare, 77 A.3d 651, 661 (Pa.Super.2013) citing Elwyn, 48 A.3d at 461. In Pisano, we cited with approval Schoellhammer's Hatboro Manor, Inc. v. Local Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 86 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Joint Executive Board of Philadelphia, for the proposition that a non-signatory to an arbitration agreement should not be compelled to arbitration because “arbitration, a matter of contract, should not be compelled of a party unless such party, by contract, has agreed to such arbitration.” Pisano, supra, at 661 citing Schoellhammer's Hatboro Manor, 231 A.2d 160, 164 (1967). However, we emphasized that “a nonparty, such as a third-party beneficiary, may fall within the scope of an arbitration agreement if that is the parties' intent.” Pisano, 77 A.3d at 661. In this case, the trial court determined that Appellants were third party beneficiaries to the agreement between Millinghausen and Legal Access after reviewing, inter alia, the following language from the January 27, 2006 agreement between Millinghausen and Legal Access: 1. [Legal Access] is engaged in the business of providing various legal services to individuals under the terms of the legal services contracts and access plans marketed and administered by [Legal Access] ... which services are provided by attorneys licensed in the state(s) in which the services are rendered to Plan Members [such as Appellants]. * * * *5 3. [Legal Access] desires to make accessible to its members (“Plan Members”) quality legal services at reasonable rates from experienced attorneys with the highest standards of professionalism and ethics ... The Network Provider [such as Millinghausen] desires to enter into an agreement with [Legal Access] pursuant to which the Network Provide[r] will provide legal services to the Plan Members pursuant to the terms of this Agreement. [Recitals Section, Agreement between Millinghausen and Legal Access, January 27, 2006.] * * * The Network Provider shall accept as a client any Plan Member referred to the Network Provider by [Legal Access] for the provision of legal services under [Legal Access'] Plans which the Network Provider is competent to provide unless (i) the Network Provider shall make a good faith judgment that its representation of the Plan Members is precluded by applicable law; or (ii) the Network Provider declines in good faith to accept as a client any Plan Member for any legitimate reason. [ ]. [Id., Section 1, Services to be Provided.] * * * The Network Provider shall strive to provide the highest quality of legal representation and service to Plan Members and shall take all reasonable steps to assure continuing competency and expertise in all areas of law necessary to provide legal services to Plan Members. At a minimum, the Network Provider shall provide the same quality of service and legal representation to Plan Members as it provides to its other clients and the Network Provider shall not discriminate between Plan Members and non- Members with a different scope of service in order to comply with the applicable Plan ... The Network Provider ... shall treat each Plan member with respect and compassion and shall use their reasonable best efforts to return any telephone call from a Plan Member within one business day. [Id., Section 7, Standard of Care.] Trial Court Opinion, 8/15/13, at 5–7. The trial court determined that “following a review of the Agreement, ... [i]t is ... clear that [Appellants], as Plan Members, are [the] intended third party beneficiaries of the Agreement.” See id., at 7. We agree with the trial court. Our agreement is informed by the following rationale expressed by our Supreme Court: The current rule in Pennsylvania for designation of a party as a third party beneficiary was first articulated in the seminal case of Spires v. Hanover Fire Insurance Co., 364 Pa. 52, 70 A.2d 828 (1950) (plurality opinion). In Spires, we held that in order for a third party beneficiary to have standing to recover on a contract, both contracting parties must have expressed an intention that the third party be a beneficiary, and that intention must have affirmatively appeared in the contract itself. Spires v. Hanover Fire Insurance Co., 364 Pa. at 57, 70 A.2d at 830–31. But, in Guy v. Liederbach, 501 Pa. 47, 459 A.2d 744 (1983), we carved out an exception to Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 87 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 the Spires rule, and allowed the beneficiary of a will to recover for legal malpractice against an attorney, despite the fact that the beneficiary was not in privity of contract with the attorney and was not named specifically as an intended beneficiary of the contract. In so doing, we adopted the Restatement (Second) of Contracts, § 302 (1979), as a guide for analysis of third party beneficiary claims in Pennsylvania. Restatement (Second) of Contracts, § 302 (1979) states: *6 Intended and Incidental Beneficiaries (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intentions of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. Restatement (Second) of Contracts § 302 (1979). Consequently, this Court in Guy concluded: There is thus a two part test for determining whether one is an intended third party beneficiary: (1) the recognition of the beneficiary's right must be “appropriate to effectuate the intention of the parties,” and (2) the performance must “satisfy an obligation of the promisee to pay money to the beneficiary” or “the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.” Guy v. Liederbach, 501 Pa. at 60, 459 A.2d at 751. The first part of the test sets forth a standing requirement which leaves discretion with the court to determine whether recognition of third party beneficiary status would be appropriate. The second part defines the two types of claimants who may be intended as third party beneficiaries. If a party satisfies both parts of the test, a claim may be asserted under the contract. Id. Scarpitti v. Weborg, 609 A.2d 147, 149–150 (Pa.1992). Instantly, the trial court, in its discretion, determined Appellants could be recognized as third party beneficiaries. Further, the contract clearly indicates that Appellants were to receive from Millinghausen the benefit of the promised performance. Therefore, we agree with the trial court's determination that Appellants are third party beneficiaries to the agreement between Millinghausen and Legal Access because both prongs of the third party beneficiary test have been met. Moreover, we find that the agreement to arbitrate between Millinghausen and Legal Access extends to Appellants. Our position is unchanged by the fact that Appellants did not sign the agreement, Pisano, 77 A.3d at 661, and is not in conflict with Pisano or Schoellhammer's Hatboro Manor. Arbitration is not being sought against a party who did not agree to arbitrate, but against Millinghausen, a party who contractually agreed to arbitration. We now turn to whether Millinghausen's tort claims against Appellants are within the scope of the arbitration agreement. The trial court determined that Millinghausen's defamation claims against Appellants were outside the scope of the arbitration clause. See Trial Court Opinion, 8/15/03, at 8. We disagree with the trial court based on our prior conclusion that the arbitration clause was broad, and applied to Millinghausen's breach of contract claim against Legal Access, which was premised in part on Appellants' alleged defamatory statements. Millinghausen, supra, at 10. We are not persuaded that the current action is outside the scope of the broad arbitration clause by which Millinghausen is bound. Therefore, based on our prior determinations in Elwyn, Callan, Pisano, Schoellhammer's Hatboro Manor, and Millinghausen's action against Legal Access, we reverse the trial court's refusal to compel this action to arbitration. *7 Appellants' fourth, fifth and sixth issues contend that the trial court erred in granting Millinghausen 60 days to conduct discovery to amend his complaint, after the trial court sustained Appellants' preliminary objections regarding the insufficiency of Millinghausen's complaint. The trial court did not address these issues in its Pa.R.A.P.1925(a) opinion because the trial court deemed them to be interlocutory. Trial Court Opinion, 8/15/13, at 9. We agree. See In re Estate of Cella, 12 A.3d 374 (Pa.Super.2010) (appeals may be taken from a final order, Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 88 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 an interlocutory order as of right or by permission, or from a collateral order). The trial court's order granting additional time for discovery so that Millinghausen may amend his complaint is not a final order terminating the action, nor an interlocutory order appealable as of right or by permission. Further, the trial court order is not a collateral order appealable under Pa.R.A.P. 313. Rule 313. Collateral Orders (a) General rule. An appeal may be taken as of right from a collateral order of an administrative agency or lower court. (b) Definition. A collateral order is an order separable from and collateral to the main cause of action where the right involved is too important to be denied review and the question presented is such that if review is postponed until final judgment in the case, the claim will be irreparably lost. Pa.R.A.P. 313(a)-(b). Here, the order granting additional time for Millinghausen to conduct discovery and to amend his complaint is not separable from Millinghausen's main tort action, nor does the order involve a public policy issue or a right which would be irreparably lost if we were to postpone its review. See Richner v. McCance, 13 A.3d 950 (Pa.Super.2011) (for an order to be separable from the main action it must be capable of being reviewed without consideration of the main issue in the action, and the issue to be considered must be important to the public at large and not just the litigants). Accordingly, Appellants' fourth, fifth and sixth issues pertaining to the trial court's order granting Millinghausen additional time to conduct discovery and amend his complaint are not properly before us. Order denying Appellants' motion to compel arbitration reversed. Matter remanded for arbitration. Jurisdiction relinquished. Justice FITZGERALD files a Dissenting Memorandum. DISSENTING MEMORANDUM BY FITZGERALD, J.: *7 Respectfully, I dissent. Unlike the majority, I would conclude Millinghausen's defamation claims fall outside the scope of the arbitration agreement between Millinghausen and Legal Access. Accordingly, I would affirm the trial court's order denying Appellants' motion to compel this matter to arbitration. As noted by the majority, [w]e review a trial court's denial of a motion to compel arbitration for an abuse of discretion and to determine whether the trial court's findings are supported by substantial evidence. In doing so, we employ a two-part test to determine whether the trial court should have compelled arbitration. The first determination is whether a valid agreement to arbitrate exists. The second determination is whether the dispute is within the scope of the agreement. *8 Majority's Memo. at 4 (citation omitted). A panel of this Court previously held that a valid agreement to arbitrate exists between Millinghausen and Legal Access. See Millinghausen v. Legal Access Plans, LLC, 60 A.3d 846 (Pa.Super.2012) (unpublished memorandum), at 12–13. The trial court in this case agreed with that holding, and further concluded that Appellants were intended third party beneficiaries to the agreement. Trial Ct. Op., 8/15/13, at 7. The majority discerned no error in this conclusion and found that the agreement to arbitrate between Millinghausen and Legal Access extends to Appellants. I agree with this determination. However, our inquiry does not end there. In order to conclude that Millinghausen can be compelled to arbitration on his defamation claims, we must find that those claims are within the scope of the arbitration agreement. The majority holds that Millinghausen's tort claims fall within the scope of the contractual arbitration clause simply because this Court previously concluded in Millinghausen that the clause was broad and applied to Millinghausen's breach of contract claim against Legal Access. Majority Mem. at 11–12. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 89 of 136 Millinghausen v. Drake, Not Reported in A.3d (2014) 2014 WL 10936665 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Critically, though, the panel in Millinghausen noted specifically that “[Millinghausen] is not asserting a defamation and slander case against [Legal Access]; he seeks damages flowing from Appellants' decision to stop referring him business.” Millinghausen, supra, at 11. In concluding that Millinghausen's claims fell within the scope of the arbitration agreement, the Millinghausen Court concluded Millinghausen's breach of contract claim against Legal Access was “a run-of-the-mill breach of contract action” and concluded that “nothing more than a breach of the referral agreement is at issue in this matter.” Id. at 12. Unlike the instant majority, I would decline to extend the holding in Millinghausen to encompass Mililnghausen's tort claims for defamation against Appellants simply because Millinghausen believed Legal Access breached the contract between them as a result of Appellants' allegedly defamatory statements. Instead, I agree with the trial court that this Court's holding in Setlock v. Pinebrook Pers. Care & Ret. Ctr., 56 A.3d 904 (Pa.Super.2012), is controlling. In that case, a nursing home resident was injured and later died when she was catapulted from her wheelchair because of the alleged negligence of the nursing home and the nursing home's employee. Id. at 905–06. The injury occurred while the resident was being escorted by the nursing home's employee to a doctor's appointment outside the nursing home's premises. Id. at 905. This Court found that wrongful death and survivorship claims did not fall within the scope of an arbitration agreement because only “causes of action arising from issues governed by the Resident Agreement” could be included. Id. at 912 (emphasis added). In the instant case, the trial court summarized the contents of the agreement as follows: *9 In the case before this court, the Agreement sets the services to be provided and the rates the Network Provider may charge in Section 1. In Section 2, the Agreement goes into great detail about [Legal Access's] technology responsibilities, and in Section 2.1, the Agreement discusses the Network Provider's acceptance of license. The agreement also sets forth attorney questionnaire in Section 3; insurance in Section 4; indemnification in Section 5; professional responsibility in Section 6; standard of care in Section 7; notification or material events: reporting in Section 8; termination in Section 9; and confidentiality, governing law and amendments in Section 10. After reviewing the provision of the Agreement, this court concludes, as did [sic] Superior Court in Setlock, that the cause of action asserted by [Millinghausen] in his complaint is a different cause of action from anything contemplated by the terms of the Agreement. [Millinghausen] alleged in his complaint that [Appellants] made defamatory statements about him, causing his relationship with [Legal Access] to be terminated. This cause of action is an intentional tort and is not contemplated by the terms of the arbitration agreement. Trial Ct. Op. at 8 (emphases added). I agree. The arbitration clause requires “any controversy or claim arising out of an alleged breach of this Agreement by either or both parties shall be submitted for settlement to an arbitrator appointed by the American Arbitration Association.” See Majority's Mem. at 5 (quoting Millinghausen, 60 A.3d at 10) (emphasis added). The language of the arbitration clause is clear—only causes of action arising from a breach of the agreement between the parties are subject to arbitration. To conclude otherwise would result in a blurring of the line between two discrete causes of action and expanding the scope of the arbitration clause beyond its plain language to incorporate tort claims outside the scope of the agreement. I discern nothing in the plain language of the contract between the parties compelling or prohibiting them from engaging in disparagement or defamatory acts. Therefore, I would affirm the trial court's order denying Appellants' motion to compel arbitration. For these reasons, I respectfully dissent. All Citations Not Reported in A.3d, 2014 WL 10936665 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 90 of 136 K Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 91 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 131770 Only the Westlaw citation is currently available. United States District Court, D. New Jersey. David Shaun NEAL, Plaintiff, v. ASTA FUNDING, INC., Gary Stern, Mary Curtin, Seth Berman, Cynthia Schatzmann (Horvat), Louis Piccolo, David Cavill, and John Does 1–10, Defendants. Civ. No. 13–3438 (KM)(MAH). | Jan. 6, 2014. Attorneys and Law Firms David Shaun Neal, Tuxedo, NY, pro se.Lauren Topelsohn, Steven I. Adler, Mandelbaum Salsburg, P.C., West Orange, NJ, for Defendants. AMENDED OPINION (Relates to Document No. 44) KEVIN McNULTY, District Judge. *1 This matter comes before the Court on the Defendants' motion (Docket No. 25) to dismiss the Complaint (Docket No. 1 (“Compl.”)) in its entirety pursuant to Rules 12(b)(6) and 12(b)(1), Fed.R.Civ.P. In addition, the pro se plaintiff, David Shaun Neal, has filed a motion to stay a pending arbitration and to impose sanctions pursuant to 28 U.S.C. § 1927 (Docket No. 28). In response to that motion, the Defendants have cross- moved for sanctions and for injunctive relief (Docket No. 34). Defendants' motion to dismiss includes the contention that Neal is bound by an arbitration agreement and should therefore “be compelled to pursue any Counts that survive ... in the Arbitration and this action [should be] stayed” pursuant to 9 U.S.C. §§ 3 and 4 (Docket No. 25– 1 at 28). The essence of Defendants' position is that these claims should be pursued, not here, but in an arbitration that is already pending (Docket No. 25–1 at 28). The essence of Neal's position is that the arbitration should be stayed and his claims should proceed in this action (and others). 1 Whether or not Neal's claims are arbitrable, however, I will stay this action pending the resolution of the pending arbitration. Consequently, I will administratively terminate Defendants' motion to dismiss the Complaint, without prejudice. 1 In addition to the present action, the Court is aware of the following actions that Neal has personally filed which arise from his dispute with ASTA: (1): A whistleblower action in the District of New Jersey that was voluntarily dismissed (New World Solutions, et al. v. ASTA Funding, Inc. et al, No. 2:12–cv–5307); (2): a whistleblower complaint with the Department of Labor (No. 2–1750–13–002); (3): a Fan–Debt Collection Practices Action in the Southern District of New York that was recently dismissed (Vivaudou et al v. ASTA Funding, Inc., 12– cv–9089); (4): a defamation action in the Southern District of New York (Neal v. ASTA Funding Inc., et al, No. 7:13–cv–2176); (5): a defamation, malpractice, and intentional infliction of emotional distress action before this Court (Neal v. ASTA Funding, Inc. et al, No. 2:13–cv–4814); (6) a fraud and criminal coercion action before the Supreme Court of New Jersey, Orange County (Neal v. American Arbitration Association et al., No.2013–cv–7991); and (6): a recently-filed complaint in this Court seeking a declaratory judgment (Neal v. ASTA Funding, Inc., No. 2:13–cv–6981). Additionally, NWS, with Neal as its representative, filed a counterclaim in the original arbitration initiated by ASTA. I. BACKGROUND The Complaint alleges that Neal was an employee of Defendant ASTA. Essentially, the Complaint alleges that ASTA wrongfully terminated Neal's employment because he blew the whistle on unlawful or unethical conduct of ASTA and its employees. See Compl. at ¶¶ 99–100, 338. More specifically, the Complaint asserts the following claims: (1) Violation of the Dodd–Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. § 5567 (“Dodd–Frank”); (2) Violation of the Sarbanes Oxley Act, 18 U.S.C. § 1514A (“SOX”); (3) Violation of New Jersey's Conscientious Employee Protection Act, N.J. Stat. § 34:19–1 (“CEPA”); and (4) Violation of public policy under Pierce v. Ortho Pharmaceuticals, 84 N.J. 58, 417 A.2d 505 (N.J.1980) (holding that an “employee at will has a cause of action for wrongful discharge when the discharge is contrary to a clear mandate of public policy”). The fifth and final count is a general request for punitive damages. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 92 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 The corporate Defendant, ASTA, is a debt acquisition and collection company. Individual Defendants Gary Stern, Mary Curtin, Seth Berman, and David Cavill are employed by ASTA. Compl. at 1–2; see Docket No. 25–1 at 3. Defendant Cynthia Schatzmann “is a former employee of ASTA and is believed to be a current employee of ASTA.” Defendant Louis Piccolo (“Piccolo”) is “a current independent director of ASTA.” Id. The Complaint alleges that Neal began his employment with ASTA in 2004 and that his company, New World Solutions (“NWS”), was retained to do certain Information Technology work for ASTA in 2009. Neal alleges that he was “a vocal critic of the lackadaisical attitude of senior management regarding legal compliance,” and that he “repeatedly complained to ASTA that it lacked a compliance office.” He further alleges that he “informed senior management at ASTA, including Defendant Stern, of the wrongful, illegal, and/ or unethical activity” committed by ASTA. Compl. at ¶¶ 99–101. Neal alleges that Defendants retaliated against him for reporting these activities. Specifically, he alleges that Stern reduced his salary, set impossible budget goals, terminated his employment, and commenced a frivolous arbitration action against him. He also alleges that Curtin, Berman, Schatzmann, Cavill, and Piccolo retaliated against him by “transmitting false and disparaging statements to various employees of ASTA,” and that Curtin, Schatzmann, and Cavill also “suggest[ed] that Neal's employment be terminated.” Compl. at 321–334. *2 Defendants deny that ASTA employed Neal. On the contrary, according to ASTA, it retained NWS, a company co-owned by Neal, as an independent contractor to perform Information Technology-support (“IT”) services. That relationship was embodied in a written Information Technology Services Agreement, dated July 1, 2009. See Docket No. 25–3 (Exhibit A) (“Consulting Agreement”). That Consulting Agreement had a term of three years. Id. ASTA states that, on June 27, 2012, it terminated the Consulting Agreement because NWS had allegedly failed to perform as warranted and inflated its billing. (Arbitration Case No: 18 117 Y 00925 12; Docket No. 25–1 at 6–7; Compl. ¶¶ 324, 373). The Consulting Agreement contains a broad clause providing for arbitration of disputes under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). 2 After terminating the Agreement, on July 26, 2012, ASTA filed a claim in arbitration with AAA alleging that NWS breached the Consulting Agreement by failing to perform as required under the agreement and by inflating its billing. Robert E. Bartkus, Esq., was duly appointed as arbitrator by the AAA. According to ASTA's filings, Neal has moved twice to remove Mr. Bartkus as arbitrator, but the AAA Administrative Review Counsel has denied those motions. (Docket No. 34–1 at 8). In the arbitration, NWS filed a counterclaim alleging that ASTA had itself breached the Consulting Agreement. (Docket 43–1, Exhibit 3 (“Counterclaim”)). 2 The arbitration clause of the Consulting Agreement reads as follows: All matters regarding the performance of IT Services under this Agreement shall be brought to the attention of the IT Services Managers assigned to ASTA and NWS. IT will be the responsibility of the IT Services Managers to communicate and develop a resolution for such matters. In the even that a dispute, controversy, or claim between the Parties arises directly or indirectly out of or in connection with this Agreement cannot be resolved by the IT Services Managers, either Party may elect to have such dispute, controversy, or claim resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). Any arbitration shall be conducted by arbitrators approved by the AAA and mutually acceptable to the Parties. If the Parties are unable to agree on the arbitrator(s), then the AAA shall select the arbitrator(s). Consulting Agreement at § 6.2. The Agreement also provides that it is to be construed in accordance with New Jersey state law. After filing the arbitration case, ASTA learned that Neal had allegedly accessed confidential information, gained personal access to ASTA employees' email accounts, and copied certain confidential information. According to Defendants, Neal thereby violated confidentiality covenants that are contained in the Consulting Agreement, as well as a confidentiality order issued by the Arbitrator. Indeed, the Defendants say, the allegations in Neal's Complaint in this action are based on those confidential materials. In the arbitration, the Arbitrator has entered a Turnover Order that, inter alia, restrained NWS and “its Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 93 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 principal Shaun Neal” from disclosing any confidential information; ordered NWS to return all copies of documents that related to ASTA other than discovery materials produced during the arbitration; and restrained NWS and Neal from using any of these materials for any purpose other than for the arbitration proceedings. See Docket No. 43 (Exhibit 5); Docket No. 34–1 at 10–11. Neal then moved in this Court to vacate the Arbitrator's Turnover Order. Magistrate Judge Hammer denied that motion (Docket No. 35), and Neal recently moved for reconsideration of Judge Hammer's order (Docket No. 39). On August 1, 2013, ASTA moved in the arbitration to supplement its statement of claim and assert new claims against NWS and Neal for alleged misappropriation of confidential information. Docket No. 34–1 at 14. At first, the Arbitrator allowed supplementation of the claims against NWS, but did not allow the addition of Neal as a party, because the request came too close to the scheduled hearing date. Id. Therefore, on September 3, 2013, ASTA initiated a second arbitration against Neal and the former co-owner of NWS, Robert F. Coyne. In that second arbitration, ASTA alleged claims of consumer fraud, violations of the Consumer Fraud and Prevention Act, and other New Jersey computer- related offenses. The original and second arbitration were recently consolidated. In connection with that consolidation, the Arbitrator, Mr. Bartkus, examined his own jurisdiction and held that Neal was individually subject to the arbitration agreement. (Docket No. 42– 1 (Exhibit 6) (“Consolidation Order”)). The arbitration hearing, originally scheduled for September 18, 2013, has been adjourned, and the arbitration is proceeding on a consolidated basis. II. DISCUSSION A. Arbitrability Under the Federal Arbitration Act and the Court's Power to Stay Litigation Pending Arbitration *3 The Federal Arbitration Act (“FAA”) reflects a longstanding “liberal federal policy favoring arbitration agreements ....“ Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The FAA is designed to “ensure judicial enforcement of privately made agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). Congress' “clear intent” in passing the FAA was “to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.” Moses H. Cone Memorial Hosp., 460 U.S. at 22. To fulfill that goal, courts must “rigorously enforce agreements to arbitrate ....“ Dean Witter Reynolds, Inc., 470 U.S. at 221. The FAA established that, “as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Memorial Hosp., 460 U.S. at 24–25; see also Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 938 (3d Cir.1985) (ambiguous or unclear cases should be resolved in favor of arbitration). To implement that federal policy in favor of arbitration, Section 3 of the FAA provides that issues within the scope of an arbitration agreement shall be referred to arbitration, and that court proceedings shall be stayed: If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration ..., the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceedings is referable to arbitration under such agreement, 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, providing the application for the stay is not in default in proceeding with such arbitration. FAA, 9 U.S.C. § 3. 3 When the parties and issues significantly overlap between a court proceeding and an arbitration, a court may stay the entire court action. That is true even where the overlap is not complete, for example, even if some of the parties or issues are not subject to arbitration. Crawford v. W. Jersey Health Sys. (Voorhees Div.), 847 F.Supp. 1232, 1240 (D.N.J.1994) (citing Tenneco Resins, Inc. v. Davy Intern., 770 F.2d 416 (5th Cir.1985); American Home Assur. Co. v. Vecco Concrete Constr. Co., 629 F.2d 961 (4th Cir.1980); Lawson Fabrics, Inc. v. Akzona, Inc., 355 F.Supp. 1146 (S.D.N.Y.), aff'd, 486 F.2d 1394 (2d Cir.1973); Harmon Elec. Const. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 94 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Co. v. Consolidated Eng. Co., 347 F.Supp. 392, 397 (D.Del.1972)). 3 The contract containing the arbitration clause must “evidence a transaction involving commerce.” Crawford v. W. Jersey Health Sys., 847 F.Supp. 1232, 1240 (D.N.J.1994) (quoting 9 U.S.C. § 2). That requirement is met when the contractual activity affects or facilitates commerce, even tangentially. Id. (citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401–02 n. 7, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)). Neither party suggests that the commerce connection is an issue here. Setting aside the mandate of the FAA, a district court also possesses the inherent discretion to control its docket. As a component of that discretion, the court has the inherent power to stay its own proceedings. See Moses H. Cone Mem'l Hosp., 460 U.S. at 21 (citing Landis v. North American Co., 299 U.S. 248, 254–255, 57 S.Ct. 163, 81 L.Ed. 153 (1936)). In Landis, for example, the Court stated: *4 [T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must an even balance.... True, the suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to someone else. Only in rare circumstances will a litigant in one cause be compelled to stand aside while a litigant in another settles the rule of law that will define the rights of both. 299 U.S. at 254–55 (citations omitted). In Merritt– Chapman & Scott Corp. v. Pennsylvania Turnpike Commission, the Third Circuit, citing Landis, reasoned that a stay of court proceedings pending arbitration is a remedy that is “within the inherent power of the court and does not require statutory authority .” 387 F.2d 768, 773 (3d Cir.1967); see also Mason–Dixon Lines, Inc. v. Local Union No. 560, Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 443 F.2d 807, 809 (3d Cir.1971) (citing Yale & Towne Mfg. Co. v. Local Lodge 1717, Machinists, 299 F.2d 882 (3d Cir.1962) (“Certainly, the normal power of a court to do equity enables it to postpone action on a complaint pending the outcome of a procedure for resolving such a dispute upon which the parties have agreed.”); Vespe Contracting Co. v. Anvan Corp., 399 F.Supp. 516, 519 (E.D.Pa.1975) (holding that the court “need rely neither on the United States Arbitration Act nor the Pennsylvania Arbitration Act ... in order to support a decision to grant a stay of proceedings pending arbitration”). B. A Referral of Claims to Arbitration and a Stay of These Proceedings Pending Arbitration is Appropriate 1. [Purposely omitted] 2. Stay of this case pending arbitration The substantive issues that either are being decided or are subject to being decided in arbitration are intertwined with the claims asserted in the Complaint, and may affect their resolution. Even if some or all of the claims in the Complaint were found non-arbitrable, a stay of this action would be appropriate. A stay serves the interests of judicial efficiency and the broad federal policy in favor of free arbitration of the disputes that are currently before the Arbitrator. Under Section 3 of the FAA and this Court's broader discretionary powers, this action will be stayed pending the outcome of arbitration. First, a stay is appropriate under Section 3 of the FAA. At least one issue (and possibly all) “involved in [this] suit or proceedings is referable to arbitration” under the Consulting Agreement's arbitration clause. 9 U.S.C. § 3. As discussed above, the claims asserted in the Complaint appear to be arbitrable, and the Arbitrator may well so find. Under such circumstances, a stay is warranted. See id.; authorities cited at pp. 5–6, supra. Any doubts as to whether a particular party or sub-issue is subject to arbitration need not preclude a stay. At the very least, “significant overlap exists between parties and issues ....” Crawford 847 F.Supp. at 1240. Under such circumstances, a Section 3 stay of court proceedings is appropriate. *5 Second, this Court has the inherent power to stay proceedings pending arbitration. I find that a stay is appropriate, taking into account all competing interests. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 95 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 See generally Landis v. N. Am. Co., 299 U.S. at 254– 55; authorities cited at pp. 6–7, supra. In particular, a court may stay proceedings in the interest of efficiency where the issues in arbitration are related to (if not strictly dispositive of) the issues before the court. Thus, in Leyva v. Certified Grocers of California, Ltd., the Ninth Circuit held that that, even where Section 3 of the FAA does not apply, a trial court may properly stay a proceeding pending arbitration where “it is efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings which bear upon the case.” 593 F.2d 857, 863–64 (9th Cir.1979). The court reasoned that “[t]his rule applies whether the separate proceedings are judicial, administrative, or arbitral in character, and does not require that the issues in such proceedings are necessarily controlling of the action before the court.” Id; see also Nederlandse Erts–Tankersmaatschappij, N.V. v. Isbrandtsen Co., 339 F.2d 440, 441–42 (2d Cir.1964) (reasoning that the district court had the inherent power to stay proceedings pending an arbitration where defendants were not party to the arbitration agreement, but the issues involved in the case may be determined in arbitration). The resolution of the arbitration will involve issues overlapping and bearing upon disputes raised in this action. The retaliation-based claims that Neal brings before this Court involve factual and legal issues closely related to those in the arbitration. Neal of course is identified with NWS. All of the opposing parties are either ASTA employees or are otherwise implicated as a result of their association with ASTA. In the arbitration, ASTA has argued that it terminated the Consulting Agreement for a legitimate reason: because NWS inflated billing and did not perform as required under the Agreement. A determination that ASTA had a legitimate reason for terminating the relationship with NWS would be highly relevant to Neal's claim, for example, that he was fired on a retaliatory basis, even assuming that he could establish that his relationship with ASTA was that of employee and employer. I agree with the Defendants that the claims in this action “are inextricably intertwined with the services provided by NWS pursuant to the Consulting Agreement.” Docket No. 25–1 at 27. And it would be inadvisable to have these intertwined claims proceed simultaneously in court and in arbitration; such a procedure would be rife with opportunities for mutual interference, inconsistent rulings, and general procedural confusion. ASTA initiated arbitration on July 26, 2012, well over a year ago. (Docket No. 25–1 at 26). NWS and ASTA remain embroiled in the ongoing arbitration. The Arbitrator has now determined that Neal is individually subject to the arbitration agreement, and has consolidated ASTA's claims against Neal with the other claims. Consolidation Order. Neal acknowledges that, as of July 26, 2013, “tens of thousands of pages of discovery ha[d] been exchanged by the parties as well as several hundred thousand emails and four depositions have occurred.” Docket No. 11–1 at 4. Neal has fully participated in the arbitrations as NWS's representative. See, e.g., Docket No 42–1 (Exhibit 8) (“Respondent's Motion for Omnibus Relief”). 4 That process should be permitted to proceed to an orderly conclusion without the interference of this Court. 4 On August 8, 2013, before the Consolidation Order was issued, Neal signed a Motion for Omnibus Relief, filed as part of the arbitration between ASTA and NWS: David Shaun Neal, Managing Partner, New World Solutions, for the Respondent– Counterclaimant, New World Solutions, Inc. Respondent's Motion for Omnibus Relief. *6 In balancing the interests of the parties, I do not find that Neal will be unduly harmed by a stay of this proceeding pending the arbitration. In the event that any of Neal's claims are not arbitrable and are not addressed in the arbitration, he may be able to pursue them in court. It is likely that the Arbitrator's resolution of the arbitrable claims would narrow and focus the nonarbitrable claims, if any, that might remain. For all of the foregoing reasons, I will stay this action pending the resolution of the arbitration. C. The Remaining Motions i. Plaintiffs Motion for Sanctions Neal has moved for sanctions pursuant to 28 U.S.C.1927 and the Court's inherent powers, arguing that Defendants and their counsel have engaged in “numerous instances of frivolous conduct ....“ Docket No. 28–1 at 5. Neal argues, inter alia, that he is not party to an arbitration agreement and that Defendants and their counsel have engaged in frivolous conduct, such as evasion of service, unauthorized practice of law, making knowingly false Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 96 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 statements to the Court, and filing an “utterly meritless arbitration demand” against Neal. Id. at 2–6. Section 1927 provides: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct. 28 U.S.C. § 1927. “Although a trial court has broad discretion in managing litigation before it, the principal purpose of imposing sanctions under 28 U.S.C. § 1927 is the ‘deterrence of intentional and unnecessary delay in the proceedings.’ ” Zuk v. Eastern Pennsylvania Psychiatric Institute, 103 F.3d 294, 297 (3d Cir.1996) (quoting Beatrice Foods v. New England Printing, 899 F.2d 1171, 1177 (Fed.Cir.1990)). Section 1927 “requires a court to find an attorney has (1) multiplied proceedings; (2) in an unreasonable and vexatious manner; (3) thereby increasing the cost of the proceedings; and (4) doing so in bad faith or by intentional misconduct.” In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 278 F.3d 175, 188 (3d Cir.2002) (citing Williams v. Giant Eagle Markets, Inc., 883 F.2d 1184, 1191 (3rd Cir.1989)). Additionally, a court has the inherent power to issue sanctions. Such circumstances that may justify sanctions pursuant to this power include “cases where a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons ....” Id. at 189 (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 45–46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991)). The claimed abuses consist substantially of ASTA's taking positions contrary to Neal in arbitration or litigation, positions that in some cases have been held to be substantially justified. Nor can I find that Defendants have vexatiously multiplied proceedings. In light of the case record, I do not find that sanctions pursuant to Section 1927 or the inherent power of the Court are appropriate here. I exercise my discretion to deny Neal's motion for sanctions. ii. Defendants' Cross Motion for Sanctions and for Injunctive Relief *7 Defendants have filed a cross motion for sanctions and for injunctive relief. Defendants argue that Neal has filed a multitude of frivolous actions to harass and burden ASTA and its representatives, draining judicial resources and abusing the judicial process in an attempt to further his campaign to harass and abuse ASTA. 5 Docket No. 34–3 at 19–20. They also maintain that Neal failed to disclose certain information and failed to effect service on Defendants as to various motions. Id. 5 See list of other actions and proceedings filed by Neal at n.1, supra. The motion for sanctions is denied. Neal's litigation conduct, while perhaps vexatious in the ordinary sense, does not, or at least does not yet, rise to the level of requiring sanctions pursuant to 28 U.S.C. § 1927, the All Writs Act, 8 U.S.C. § 1651(a), or the Court's inherent power. Influenced by my consideration that sanctions are a last resort, and that Neal appears pro se, I will exercise my discretion to deny sanctions at the present time. All parties, however, whether pro se or represented, are cautioned that the rules of Court must be complied with, and that related claims should not be asserted piecemeal in multiple actions. The motion for an injunction is likewise denied. Defendants request that the Court restrain Neal from filing any further complaints or motions with respect to ASTA and any of its representatives or agents without leave of court, pursuant to the All Writs Act. (Docket No. 34–1 at 2). The Third Circuit has held that, “while the All Writs Act, 28 U.S.C. § 1651, gives the district court the power to issue an injunction to restrict the filing of meritless pleadings, it is an extreme remedy which must ‘be narrowly tailored and sparingly used.’ ” Abdul– Akbar v. Watson, 901 F.2d 329, 332 (3d Cir.1990) (quoting Matter of Packer Ave. Associates, 884 F.2d 745, 747 (3d Cir.1989)). There is a strong preference for dealing with actions on the merits, rather than precluding their filing altogether. I do not find that the extreme remedy of an injunction is necessary here, particularly in light of the fact that this case, at least, will now be stayed pending the outcome of arbitration. iii. Other pending matters Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 97 of 136 Neal v. Asta Funding, Inc., Not Reported in F.Supp.3d (2014) 2014 WL 131770 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Neal has moved for this Court to stay the arbitration pending the resolution of his claims in this Court. As explained above, I have stayed this action in order to permit arbitration to proceed. In light of my resolution of those issues, Neal's application is denied. As noted above, Magistrate Judge Hammer denied Neal's motion to vacate the Arbitrator's Turnover Order (Docket No. 35). Neal recently moved for reconsideration of Judge Hammer's order (Docket No. 39). That reconsideration motion will be denied in light of my stay of this action. The Court does not find it appropriate to interfere with such interlocutory rulings in the arbitration. CONCLUSION Defendants' motion to dismiss Neal's claims for failure to state a claim is DENIED as presented and administratively terminated without prejudice. Meanwhile, this entire action is STAYED pending the outcome of the ongoing arbitration. Plaintiffs motion for sanctions is DENIED. Defendants' cross motion for sanctions and injunctive relief is DENIED. Plaintiffs motion to stay the arbitration is DENIED. Plaintiffs motion for reconsideration of Magistrate Judge Hammer's order declining to vacate the Arbitrator's Turnover Order is DENIED. *8 An appropriate order follows. All Citations Not Reported in F.Supp.3d, 2014 WL 131770 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 98 of 136 L Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 99 of 136 1 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA EDWARD M. OSTROSKI and KATHLEEN : 4:15-cv-2324 OSTROSKI, on behalf of themselves and : others similarly situated, : Plaintiff, : Hon. John E. Jones III : v. : : CHESAPEAKE OPERATING, LLC, : Defendant. : ORDER AND NOW, this 30th day of September, 2016, in consideration of the Defendant’s Motion to Compel Individual Arbitration (Doc. 9) and Plaintiffs’ Motion to Certify Class (Doc. 23), and in further recognition of this Court’s Memorandum and Order in the companion case of Chesapeake Appalachia, LLC v. Ostroski, et al.; 4:16-cv-50, wherein we determined that the subject Lease does not permit class arbitration, it is hereby ORDERED that the Defendant’s Motion to Compel Individual Arbitration (Doc. 9) is GRANTED, and it is ORDERED that the Plaintiffs must submit this matter to individual arbitration before the American Arbitration Association, and further ORDERED that the Plaintiffs’ Motion to Certify Class (Doc. 23) is DENIED. This matter is STAYED pending Case 4:15-cv-02324-JEJ Document 27 Filed 09/30/16 Page 1 of 2Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 100 of 136 2 the parties’ individual arbitration, however, we shall permit the Clerk of Court to ADMINISTRATIVELY CLOSE this matter for purposes of docket control.1 s/ John E. Jones III John E. Jones III United States District Judge 1 The administrative closure of this matter does not prevent the parties from filing a motion to confirm the arbitration award, if necessary,or any other ancillary matters that arise in this matter. Case 4:15-cv-02324-JEJ Document 27 Filed 09/30/16 Page 2 of 2Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 101 of 136 M Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 102 of 136 Roman v. Chesapeake Appalachia, L.L.C., Not Reported in F.Supp.2d (2012) 2012 WL 2076846 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2012 WL 2076846 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Larry E. ROMAN and Roberta D. Roman, Plaintiffs v. CHESAPEAKE APPALACHIA, L.L.C., Defendant. No. 3:11cv1614. | June 8, 2012. Attorneys and Law Firms Taunya M. Rosenbloom, Law Office of Taunya Knolles Rosenbloom, Athens, PA, Todd J. O‘Malley, O'Malley & Langan P.C., Scranton, PA, William S. Friedlander, Friedlander, Friedlander & Assoc., Waverly, NY, for Plaintiffs. David R. Fine, Harrisburg, PA, for Defendant. MEMORANDUM JAMES M. MUNLEY, District Judge. *1 Before the court for disposition is Defendant Chesapeake Appalachia, L.L.C.'s motion to compel arbitration or, in the alternative, to dismiss counts II and III and the demands for punitive damages and attorneys fees. (Doc. 3). The matter is fully briefed and ripe for disposition. For the following reasons, the court will compel arbitration. Background Plaintiffs Larry E. Roman and Roberta D. Roman (collectively “plaintiffs”) initiated the instant action on August 29, 2011 with a three count complaint against Defendant Chesapeake Appalachia, L.L .C. (hereinafter “defendant”). (See Doc. 1, Compl. (hereinafter “Compl.”)). In Count I, plaintiffs seek a declaration, pursuant to the Declaratory Judgment Act, 28 U.S.C § 2201, that their oil and gas lease with defendant is no longer in effect. (Id. ¶¶ 29–42). Count I I is a Pennsylvania state law claim for slander of title, in which plaintiffs seek $250,000.00 in damages. (Id. ¶¶ 43–51). Count III is a Pennsylvania state law claim for breach of covenant of good faith and fair dealing, in which plaintiffs demand $250,000.00 in compensatory damages and $250,000.00 in punitive damages for defendant's alleged bad faith. (Id. ¶¶ 52–62). The well-pleaded facts alleged in the complaint are summarized as follows. On January 19, 2001, plaintiffs executed an “Oil and Gas Lease” (hereinafter “the lease”) with Central Appalachian Petroleum. (Id. ¶ 7; Doc. 1–2, Ex. A, Oil & Gas Lease). This lease provides the lessee with exclusive rights to “all the oil and gas and their constituents, whether hydrocarbon or non-hydrocarbon, underlying” plaintiffs land in Ulster Township, Bradford County, Pennsylvania. (Doc. 1–2, Ex. A, Oil & Gas Lease). The lease also grants the lessee with the rights to drill, explore, construct roads, lay pipelines, store natural resources and otherwise make use of its right to the oil and natural gas on the land. (Id.) Approximately 135.88 acres of plaintiffs' property is subject to this lease. (Id.; Compl. ¶ 10). Some time after executing the lease, Central Appalachian Petroleum assigned its interest in the lease to defendant. (Compl.¶ ¶ 8–9). The lease has a primary term of ten years, commencing on January 19, 2001. (Id. ¶ 12; Doc. 1–2, Ex. A, Oil & Gas Lease). The lease provides that the primary term of ten years would be extended “for as long thereafter as operations are conducted on the Leasehold in search of or production of oil, gas, or their constituents, or for as long as a well capable of production is located on the Leasehold, or for as long as extended by provision herein, or for as long as the Leasehold is used for underground storage of gas, or for the protection of stored gas.” (Doc. 1–2, Ex. A, Oil & Gas Lease). Plaintiffs contend that “[n]o drilling, exploration, production, transportation or storage operation sufficient to extend the Lease has been conducted on the plaintiffs' leasehold by the Lessee or any successor including defendant Chesapeake” since the lease was executed. (Compl.¶ 14). *2 The lease contains two other provisions that are particularly pertinent to this action. The first of these provisions provides that the leasehold, or a portion of the leasehold, could be “unitized.” (Id. ¶ 15). This unitization provision grants the lessee 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 ase 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 103 of 136 Roman v. Chesapeake Appalachia, L.L.C., Not Reported in F.Supp.2d (2012) 2012 WL 2076846 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 units either by contact right or pursuant to government authorization.” (Doc. 1–2, Ex. A, Oil & Gas Lease). The lease provides that the lessor will receive a proportional share of the royalties if the lessor's property is unitized. (Id.; Compl. ¶ 17). If the lessor's property is placed into a unit, “the drilling, operations in preparation for drilling, production from, or payment for Royalty, Shut- in Royalty, or Delay in Marketing for a well on such a unit shall have the same effect upon the terms of this Lease as if a well were located on the Leasehold.” (Doc. 1–2, Ex. A, Oil & Gas Lease). The second provision of this lease that is pertinent to this action is the arbitration clause, which provides as follows: ARBITRATION. In the event of a disagreement between Lessor and Lessee concerning this lease, performance thereunder, or damages caused by Lessee's operations, settlement shall be by a panel of three disinterested arbitrators. Lessor and Lessee shall appoint and pay the fee of one each, and the two so appointed shall appoint the third, whose fee shall be borne equally by Lessor and Lessee. The award shall be by unanimous decision of the arbitrators and shall be final. (Doc. 1–2, Ex. A, Oil & Gas Lease). On January 18, 2011, at 4:56 p.m., defendant filed a unitization declaration with the Bradford County Recorder of Deeds. (Compl. ¶ 19; Doc. 1–3, Ex. B, Decl. & Notice of Pooled Unit). This pooled unit, named the “Wasyl Unit,” includes a portion of plaintiffs' leased property. (Compl.¶¶ 19–20). Plaintiffs allege that defendant was aware, or should have been aware, that the primary term of the lease was going to expire and no “operations” triggering an extension of the lease had been conducted. (Id. ¶ 22). Plaintiffs contend that defendant filed the declaration of the Wasyl Unit on the eve of the expiration of the primary term of the lease in an attempt to extend the term. (Id. ¶¶ 21–22). Plaintiffs further posit that insufficient operations were conducted on the leasehold property and on the Wasyl Unit to trigger an automatic extension under the lease, that their property cannot be considered a part of the Wasyl Unit as a matter of law and public policy, and that defendant's unlawfully clouded the title to plaintiffs' property. (Id. ¶¶ 23–25). Defendant responded to plaintiffs complaint with a motion to compel arbitration, or, in the alternative, to dismiss plaintiffs' Pennsylvania state law claims for slander of title and bad faith and to strike plaintiffs' requests for attorney's fees and punitive damages. (See Doc. 3). The parties fully briefed the issues, bringing the case to its current posture. Jurisdiction *3 The court has jurisdiction pursuant to the diversity statute, 28 U.S.C. § 1332. Plaintiffs Larry Roman and Roberta Roman are citizens and residents of the Commonwealth of Pennsylvania. (Compl.¶ 1). Defendant Chesapeake Appalachia, L.L.C. is an Oklahoma limited liability company with a business address in Oklahoma. (Id. ¶ 2). Because complete diversity of citizenship exists among the parties and the amount in controversy exceeds $75,000.00, the court has jurisdiction over the case. See 28 U.S.C. § 1332. Because we are sitting in diversity, the substantive law of Pennsylvania shall apply to the instant case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir.2000) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). Legal Standard The question in this case is whether the parties should be compelled to arbitrate this dispute. Both Federal and Pennsylvania state law strongly favor the enforcement of arbitration provisions. 1 See Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir.2009) (“It is well established that the Federal Arbitration Act (FAA), reflects a ‘strong federal policy in favor of resolution of disputes through arbitration.’ ” (quoting Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 263 (3d Cir.2003))); Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa.Super.Ct.2006) (“It is hornbook law that Pennsylvania favors the enforceability of agreements to arbitrate.” (citing Quiles v. Fin. Exch. Co., 897 A.2d 281, 285 (Pa. Super.Ct.2005))). Contracts with an arbitration clause are treated with a “presumption of arbitrability in the sense that ‘[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not suceptible to an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.’ ” AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)). ase 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 104 of 136 Roman v. Chesapeake Appalachia, L.L.C., Not Reported in F.Supp.2d (2012) 2012 WL 2076846 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 1 Another court sitting in this district has held that, when it comes to oil and gas leases, Pennsylvania law, and not the FAA, applies. See Ulmer v. Chesapeake Appalachia, L.L.C., No. 4:08–cv–2062 (Doc. 11), slip op. at 4 (M.D.Pa. Jan. 16, 2009). Defendant disputes whether the holding in Ulmer is applicable in the instant case. (See Doc. 5, Br. in Supp. of Def.'s Mot. to Compel Arbitration at 5 n.2). The court need not resolve this dispute because the FAA and the Pennsylvania Uniform Arbitration Act determine the scope of arbitration provisions similarly. See State Farm Mut. Auto. Ins. Co. v. Coviello, 233 F.3d 710, 713 n. 1 (3d Cir.2000) (“[T]here is no meaningful difference between federal and Pennsylvania law when reviewing the scope of an arbitration clause.”). Courts applying either Federal and Pennsylvania state law conduct the same two part inquiry to determine the enforceability of arbitration provisions. 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, 560 F.3d at 160; see also Messa v. State Farm Ins. Co., 433 Pa.Super. 594, 641 A.2d 1167, 1168 (Pa.Super.Ct.1994). “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, 341 F.3d at 263–64; see also 9 U.S.C. §§ 3, 4. Discussion The parties to the instant dispute agree that a valid agreement to arbitrate exists, thus satisfying the first step of the two-step process described in Kireleis v. Dickies, McCamey & Chikote, P.C. and Messa v. State Farm Insurance Company. (See Doc. 5, Br. in Supp. of Def.'s Mot. to Compel Arbitration at 6; Doc. 7, Br. in Opp'n to Def.'s Mot. to Compel Arbitration at 3). The parties dispute the second prong, whether the particular dispute falls within the scope of the arbitration agreement. *4 First, plaintiffs argue that the issue of arbitration is moot because the primary lease term expired on January 18, 2011 and because “plaintiffs' claims relate to conduct independent of the lease....” (Doc. 7, Br. in Opp'n to Def.'s Mot. to Compel Arbitration at 3). Plaintiffs do not support this argument with case law. In fact, plaintiffs temper their contention that the expiration of the lease term voids the arbitration clause by recognizing precedent from this district in direct contrast with their position. See Beinlich v. Chesapeake Appalachia LLC, No. 3:11–cv–566 (Doc. 13) (M.D.Pa. May 31, 2011) (order granting motion to compel arbitration). Like the court in Beinlich, we find that the agreement to arbitrate does not expire with the alleged termination of the lease term. The court further agrees that “it makes no sense to allow a plaintiff (sic) to avoid arbitration by arguing that the lease has expired when the very issue of the litigation is whether the lease remains in effect.” (Doc. 9, Reply Br. in Supp. of Def.'s Mot. to Compel Arbitration at 2). Second, plaintiffs contend that the arbitration clause at issue does not cover their tort claims. Plaintiffs essentially concede that their claim for declaratory judgment should be compelled to arbitration; plaintiffs instead focus on characterizing their tort claims as falling outside the scope of the arbitration clause. (Doc. 7, Br. in Opp'n to Def.'s Mot. to Compel Arbitration at 4). Defendant counters plaintiffs' argument by pointing to the broad language of the arbitration provision, which requires arbitration of any disagreement “concerning this lease, performance thereunder, or damages caused by Lessee's operations....” (Doc. 1–2, Ex. A, Oil & Gas Lease). Defendant maintains that courts have broadly interpreted arbitration clauses covering claims “relating to” or “concerning” the agreement and that tort claims, such as the ones plaintiffs allege, fit under these broad arbitration claims. See U.S. Claims, Inc. v. Saffren & Weinberg, LLP, No. 07–0543, 2007 WL 4225536, at *7 (E.D.Pa. Nov.29, 2007) (“It is well-established that where separate tort claims arise out of the same facts as the breach of contract claim, a broadly worded arbitration provision covers such claims.”); Hearon v. AstraZeneca LP, No. 02–3189, 2003 WL 21250640, at *5 (E.D.Pa. Mar.24, 2003) (finding that “the breadth of the language of the arbitration clause establishes that it was intended to apply to all disputes related to Plaintiff's termination” and not merely disputes concerning the specific provisions of her employment agreement). The court agrees with defendant that all of plaintiffs' claims in the complaint should be compelled to arbitration. The language of the arbitration provision, which requires the arbitration of “disagreement[s] between Lessor and Lessee concerning this lease, performance thereunder, or damages caused by Lessee's operations,” is broad. (See Doc. 1–2, Ex. A, Oil & Gas Lease). The arbitration clause does not exclude tort claims or claims concerning the lease from compulsory arbitration. ase 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 105 of 136 Roman v. Chesapeake Appalachia, L.L.C., Not Reported in F.Supp.2d (2012) 2012 WL 2076846 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 It is settled that courts in Pennsylvania compel tort claims to arbitrate if the arbitration clause at issue is broad enough. See Muhlenberg Twp. Sch. Dist. Auth. v. Pa. Fortunato Constr. Co., 460 Pa. 260, 333 A.2d 184, 186 (Pa.1975). The cases plaintiffs rely on for support involve tort claims unrelated to the underlying contract and arbitration provisions that are narrower than the instant arbitration clause. Compare (Doc. 1–2, Ex. A, Oil & Gas Lease) (stating that “concerning this lease, performance thereunder, or damages caused by Lessee's operations” are to be compelled to arbitration), with Hazleton Area Sch. Dist. v. Bosak, 671 A.2d 277, 279, 282 (Pa.Commw.Ct.1996) (holding that an arbitration provision providing that the parties will arbitrate disputes “arising out of or relating to this Agreement or breach thereof” is not inclusive of negligence claims for defects in a structure), and Edelstein v. Martin, No. 1849, slip op. (Pa.Ct.Comm.Pls.Phila.Co. Mar. 18, 2008) (finding that the “wrongful act” torts alleged against a former partner are not subject to compulsory arbitration because these torts did not fall under the arbitration agreement, which covers disputes that “arise out of” or “relate to” the partnership agreement). *5 With respect to plaintiffs' first tort claim, slander of title, the court finds that this claim falls under this arbitration clause. Plaintiffs themselves describe this claim as “rest[ing] on allegations regarding defendant's bad faith recording of a declaration of unitization on January 18, 2011, only hours before the ten-year primary term of plaintiff's (sic) lease was to expire, and on defendant's failure, within the primary term of the lease, to conduct operations on the leasehold or the unitized lands sufficient to extend the lease past the primary term.” (Doc. 7, Br. in Opp'n to Def.'s Mot. to Compel Arbitration at 6). Thus, plaintiffs' own description of this claim explains that it concerns the unitization provision of the lease and whether the lease was validly extended. Plaintiffs' second tort claim for breach of the covenant of good faith and fair dealing similarly falls under the arbitration clause and will be compelled to arbitration. Plaintiffs point to the “terms of the parties' lease in the instant case” to support their contention that defendant undertook the unitization of plaintiffs' property in bad faith. (Doc. 7, Br. in Opp'n to Def.'s Mot. to Compel Arbitration at 13). Furthermore, when it comes to this tort claim, plaintiffs explained that their “grievance is ... with the bad faith recording of the declaration in light of defendant's failure and inability to develop the leasehold or the unit prior to the expiration of plaintiff's (sic) lease.” (Id.) Therefore, plaintiffs' summary of this claim establishes that the bad faith claim concerns the terms of the lease and whether the unitization was a valid exercise of defendant's rights under the lease. 2 2 Our decision to compel all of plaintiffs' claims to arbitration is consistent with recent precedent in this district in which another court compelled nearly identical claims to arbitration pursuant to a nearly identical arbitration clause. See generally Vosburg v. Chesapeake Appalachia, L.L.C., No. 3:11–cv– 1615 (Doc. 10), slip op. (M.D.Pa. Nov. 16, 2011). The plaintiffs in Vosburg and the instant case are represented by the same attorney, who raised the same arguments in opposition to compelled arbitration. The court in Vosburg rejected plaintiffs' arguments against compelled arbitration and noted that this case is similar to other cases in which separate tort claims were compelled to arbitration. See id. at 9 (quoting U.S. Claims, Inc., 2007 WL 4225536, at *7). Therefore, like the court in Vosburg, we will compel this case to arbitration. Conclusion For the reasons stated above, the court will compel arbitration in this case. In light of the court's ruling compelling arbitration, it is not necessary to address defendant's argument in the alternative. An appropriate Order follows. ORDER AND NOW, to wit, this 7th day of June 2012, it is hereby ORDERED that: 1. Defendant Chesapeake Appalachia, L.L.C.'s motion to compel arbitration or, in the alternative, to dismiss counts II and III and the demands for punitive damages and attorney's fees (Doc. 3) is GRANTED; 2. Plaintiffs are COMPELLED TO ARBITRATE all claims contained in their complaint (Doc. 1); and 3. The Clerk of Court is directed to ADMINISTRATIVELY CLOSE this case. ase 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 106 of 136 Roman v. Chesapeake Appalachia, L.L.C., Not Reported in F.Supp.2d (2012) 2012 WL 2076846 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 All Citations Not Reported in F.Supp.2d, 2012 WL 2076846 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. ase 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 107 of 136 N Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 108 of 136 Ryan v. Dolan, Not Reported in A.3d (2013) 2013 WL 11250884 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2013 WL 11250884 Only the Westlaw citation is currently available. NON–PRECEDENTIAL DECISION— SEE SUPERIOR COURT I.O.P. 65.37 Superior Court of Pennsylvania. Richard M. RYAN (Individually and Derivatively on behalf of VJC, LLC, also formerly known as Voyager Jet Center, LLC), Appellees v. James J. DOLAN; Michael Dolan; Charles P. Falce; W. Dean Genge; Douglas L. Hein; Voyager Group, LP; 1776 Holdings, LLC; Voyager Jet Center, LLC; Voyager Jet Charter Services, LLC; Voyager Jet Charter Services, Inc.; Voyager Jet Fuelers, LLC; Jet Access, LLC; Does 1–10, Appellants. No. 1561 WDA 2012. | Filed Nov. 27, 2013. Appeal from the Order Entered September 25, 2012, In the Court of Common Pleas of Allegheny County, Civil Division at No(s): GD12–003788. BEFORE: FORD ELLIOTT, P.J.E., MUSMANNO, J., and OTT, J. MEMORANDUM BY OTT, J.: *1 James J. Dolan; Michael Dolan; Charles P. Falce; W. Dean Genge; Douglas L. Hein; Voyager Group, LP; 1776 Holdings, LLC; Voyager Jet Center, LLC; Voyager Jet Charter Services, LLC; Voyager Jet Charter Services, Inc.; Voyager Jet Fuelers, LLC; Jet Access, LLC; and Does 1–10 (collectively “Defendants”) appeal from the Order denying their Preliminary Objections seeking compulsory arbitration. 1 Following a thorough review of the submissions by the parties, relevant law, and the certified record, we affirm in part, reverse in part, and remand for further proceedings. 1 Our jurisdiction for this appeal is derived from Pa.R.A.P. 311(a)(8) (allowing appeals from orders appealable by statute) and 42 Pa.C.S. § 7320(a) (1) (declaring orders denying application to compel arbitration immediately appealable). See also, Callan v. Oxford Land Development, Inc., 858 A.2d 1229 (Pa.Super.2004) (acknowledging applicability of Rule 311(a)(8) and Section 7320(a)(1)). We rely upon the procedural and factual history provided by the Honorable Christine A. Ward, in her 1925(a) Opinion. We quote, in relevant part: In its current amended form the Complaint alleges multiple counts of fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, conversion, breach of contract, breach of the PA Uniform Fraudulent Transfer Act, corporate waste/ mismanagement, breach of fiduciary duty, tortious interference with contractual relations, wrongful termination, and conspiracy, in relation to actions allegedly taken during the creation and operation of an aircraft management company based out of the Allegheny County Airport (the “Business”). In response to these alleged misdeeds the Plaintiffs request compensatory damages, punitive damages, accounting and restitution, promissory estoppel in regards to Plaintiff Ryan's ownership of the Business, injunctive relief to keep harm from being done to the business and to keep Plaintiff Ryan from being deprived of his assets, and costs, interest, and attorney's fees. On September 25, 2012, oral argument on Defendants' Preliminary Objections occurred before this court. The Defendants raised only one objection, under Pa.R.Civ.P. 1028(a)(6), arguing that the action could not be litigated because it is subject to an agreement to arbitrate. On consideration of the arguments presented in the parties' briefs and at argument, this Court declined Defendants' request to transfer any of the counts of Plaintiff's Amended Complaint to arbitration. Upon further consideration, under the Federal Arbitration Act, this Court believes that it should have referred Counts, I, III, V, VI, VIII, X–XIII, XV and XVII–XIX to arbitration as to parties Ryan, Dolan and Voyager Group, LP. * * * At this early point in the proceedings the only facts that have been put forth are those presented by the Plaintiffs; the Defendants have not answered the Complaint, and thus have not confirmed or denied any allegations. Consequently, for the sake of making our determination on this motion we therefore rely on the Plaintiffs' alleged facts. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 109 of 136 Ryan v. Dolan, Not Reported in A.3d (2013) 2013 WL 11250884 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 In February, 2001 Plaintiff Ryan and Defendant Dolan (as the Sole Member of Defendant 1776 Holdings, LLC, acting as the General Partner for Defendant Voyager Group, LP) signed an Operating Agreement (the “Agreement”) for the purpose of forming a company called Voyager Jet Center, LLC (the “Company”). The purpose of the Company was to operate an aircraft flight center out of the Allegheny County Airport. The contributions of the two signing parties were to be as follows: Voyager Group, LP would contribute $100,000 of capital investment and a small number of jets, and Ryan would assign all his rights and interests in Aviation Manager Services, Inc., a jet management company that Ryan owned and operated for the past year. As a result, Voyager Group, LP would gain a 66.67% interest in the Company, and Ryan would acquire a 33.33% interest in the Company. Ryan and Dolan were listed as Managers of the Company. *2 The Agreement included the following clauses of note: • a dispute resolution provision stating that “[a]ny controversy or claim arising out of or relating to the Operating Agreement or any breach thereof shall be settled by binding arbitration in accordance with the United States Arbitration Act [sic ] ...”; (Agreement, ¶ 15.1) and • a third-party beneficiaries provision, stating that “[t]he provisions of this agreement are intended solely for the benefit of the Members and the Managers and create no rights or obligations enforceable by any third party, including creditors of the Company, except as otherwise provided by applicable law.” (Agreement, ¶ 15 .10). In April, 2005, one or more of the Defendants, without Ryan's knowledge, amended the name of the Company from Voyager Jet Center, LLC to VJC, LLC. Immediately thereafter one or more of the Defendants created a new company with the now available name of Voyager Jet Center, LLC (“Voyager Jet Center II”). From this point on Ryan continued to work for and negotiate leases for “Voyager Jet Center, LLC”, unaware that this title now referred to a new entity, and that his efforts were on behalf of a completely different company in which he had no ownership interest. The leases, contracts, and assets of the Company did not appear to change in any way. In January of 2012, Ryan attempted to activate the mandatory buy-out provision included in the Agreement. In response, Ryan was informed that the Agreement did not apply to the “Voyager Jet Center, LLC” that he was working for, and that he had no interest in said company. Upon receiving this information, Plaintiffs immediately began legal proceedings. Trial Court Opinion, 1/10/13, at 2–6. Although Judge Ward initially overruled the Preliminary Objections in toto, she reconsidered her ruling and now requests our Court to affirm in part and reverse in part. We agree with Judge Ward's current analysis. Our standard of review is as follows: Our review of a claim that the trial court improperly denied the appellant's 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. Pisano v. Extendicare Homes, Inc., ––– A.3d ––––, 2013 PA Super 323 (8/12/13) (citation omitted). As Judge Ward noted, “[a]t this early point in the proceedings the only facts that have been put forth are those presented by the Plaintiffs; the Defendants have not answered the Complaint, and thus have not confirmed or denied any allegations.” Trial Court Opinion, at 4. Relying upon Plaintiffs' alleged facts, as the trial court did, it appears that the Defendants are seeking to enforce the arbitration clause of the Operating Agreement after they unilaterally absented themselves from the agreement by dissolving the original company and re-forming another, similarly named, company without informing Ryan. *3 In determining that some of the claims should be decided in arbitration and others should remain before the Court of Common Pleas, the trial court specifically relied on two clauses in the agreement: Paragraph 15.1, regarding dispute resolution and Paragraph 15.10, regarding third-party beneficiaries. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 110 of 136 Ryan v. Dolan, Not Reported in A.3d (2013) 2013 WL 11250884 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 Paragraph 15.1 is broadly stated, encompassing “any controversy or claim arising out of or relating to the Operating Agreement or any breach thereof shall be settled by binding arbitration in accordance with the United States Arbitration Act, Title 9, United States Code ...”. However, Paragraph 15.10 limits the effect of paragraph 15.1 (among other paragraphs) to “Members and Managers and creates no rights or obligations enforceable by any third party, including creditors of the Company, except as otherwise provided by applicable law.” In reviewing the denial of a motion to compel arbitration, we must determine whether the trial court's findings are supported by substantial evidence and whether the trial court abused its discretion in denying the petition (or, as in this matter, preliminary objection). Dodds v. Pulte Home Corporation, 909 A.2d 348 (Pa.Super.2006). There are multiple benchmarks used to conduct this review. We employ a two-part test, determining whether there is a valid arbitration agreement and then, whether the dispute falls within the scope of that agreement. Elwyn v. DeLuca, 48 A.3d 457 (Pa.Super .2012). We are also cognizant of the fact that arbitration is a matter of contract. Id. While “the courts of this Commonwealth strongly favor the settlement of disputes by arbitration”, 2 “arbitration agreements are to be strictly construed and such agreement should not be extended by implication.” 3 “The scope of an arbitration agreement is determined by the intention of the parties as ascertained in accordance with the rules governing contracts generally.” Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1273 (Pa.Super.2004) (citation omitted). “In general, only parties to an arbitration agreement are subject to arbitration. However, a non-party, such as a third party beneficiary, may fall within the scope of an arbitration agreement if that is the parties' intent.” Id., at 1271. 2 Smith v. Cumberland Group, Ltd., 687 A.2d 1167, 1171 (Pa.Super.1997). 3 Elwyn, 48 A.3d at 461. We note, too, the Federal Arbitration Act 4 was invoked in Paragraph 15.1. The United States Supreme Court has recognized and accepted the fact that application of a valid arbitration clause may produce piecemeal litigation. See KPMG LLP v. Cocchi, 132 S.Ct. 23 (U.S.2011) (per curiam ) citing Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217 (1985). 4 “United States Arbitration Act, Title 9, United States Code.” See ¶ 15.1, Operating Agreement. With these standards in mind, our review of the certified record leads to the conclusion that the trial court's order denying the preliminary objections in toto should be affirmed in part and reversed in part, in accordance with the trial court's opinion filed January 10, 2013. Judge Christina A. Ward determined the arbitration clause is facially valid and the scope of the subject matter of the clause is broad enough to encompass all of the allegations raised. However, the beneficiary clause, Paragraph 15.10, specifically states that the Agreement is meant to benefit only the “Members and Managers” of the Company. Therefore, those claims involving Ryan, James J. Dolan and the Voyager Group, LP, fall under the terms of the Agreement and are required to be heard in binding arbitration. *4 We also agree with Judge Ward's determination that the remaining defendants, those other than Dolan and the Voyager Group, LP, cannot be classified as either Members or Managers. Therefore, we believe the trial court also correctly determined that claims raised against those defendants fall outside the intended scope of the Agreement. There are circumstances in which non-signatory, third parties, such as the remaining defendants here, can be included under an arbitration provision. See Smay, supra; Dodds, supra. However, those cases do not require the inclusion of non-signatories in all circumstances. Further, in those cases our Court was only asked to interpret the subject matter clauses to determine the applicability of the arbitration clause and so determined the broad scope of subject matter evidenced the intent to arbitrate the related claims. Therefore, those cases do not address the instant circumstances in which there is other applicable limiting language. Accordingly, the generic language of “other applicable law,” found in Paragraph 15.10 of the Operating Agreement, does not act to negate the specific language limiting application of the agreement to Members and Managers, found in the same paragraph. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 111 of 136 Ryan v. Dolan, Not Reported in A.3d (2013) 2013 WL 11250884 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Finally, while judicial economy is served by trying all claims together, as noted, the FAA both contemplates and allows for the piecemeal litigation fashioned by Judge Ward. While judicial economy is a factor to be considered, it should not supplant the intent of the parties. Therefore, we agree with the trial court that Counts I, III, V, VI, VIII, X–XIII, XV, and XVII–XIX as to Ryan, Dolan and Voyager Group, LP, should be, and hereby are, referred to binding arbitration as set forth in the Agreement. All other counts as they apply to all other defendants are to remain under the jurisdiction of the Court of Common Pleas of Allegheny County. Because the trial court abused its discretion in denying, in toto, Defendants' Preliminary Objections to compel arbitration and based on the foregoing, we affirm in part and reverse in part. Order affirmed in part and reversed in part. Case remanded for action consistent with this decision. Jurisdiction relinquished. All Citations Not Reported in A.3d, 2013 WL 11250884 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 112 of 136 O Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 113 of 136 Specialty Bakeries, Inc. v. Robhal, Inc., Not Reported in F.Supp. (1997) 1997 WL 379184 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 1997 WL 379184 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. SPECIALTY BAKERIES, INC., et al. v. ROBHAL, INC., et al. No. CIV.A. 97–1057. | June 24, 1997. BARTLE MEMORANDUM *1 Plaintiff Specialty Bakeries, Inc. (“Specialty Bakeries”) instituted this diversity action on February 12, 1997 to compel its bagel store franchisees, defendants RobHal, Inc. and HalRob, Inc. (“HalRob”), to arbitrate a dispute under a franchise agreement. Pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1–14, the court ordered arbitration on March 26, 1997 and then on April 15, 1997 enjoined HalRob from proceeding with an action in the New Jersey Superior Court which violated the parties' agreement to arbitrate. Specialty Bakeries, Inc. v. RobHal, Inc., 961 F.Supp. 822 (E.D.Pa.1997). Presently before the court is the motion of HalRob to consolidate two arbitration proceedings currently before the American Arbitration Association (“AAA”). Defendants also ask this court to stay one of the arbitrations pending a decision from the Court of Appeals for the Third Circuit on their appeal from this court's April 15, 1997 order. 1 The first of the two arbitrations was filed by plaintiff Specialty Bakeries on March 7, 1997. It seeks to recoup attorney's fees which it has expended in this court and the New Jersey state court on the ground that HalRob improperly resorted to a lawsuit instead of arbitration as their franchise agreement requires. Because Specialty Bakeries seeks under $50,000, it is on an expedited arbitration track under AAA rules. This arbitration will most likely be heard before the second arbitration. 2 The second arbitration, filed by HalRob, was not instituted until April 8, 1997, a delay of almost two weeks after this court's order dated March 26, 1997 compelling such arbitration. In this proceeding HalRob alleges that Specialty Bakeries breached the non-competition provision in their franchise agreement. Since HalRob seeks damages in excess of $50,000, this arbitration is not on an expedited track under AAA rules. On May 1, 1997, HalRob requested that AAA consolidate these two arbitrations, or in the alternative, stay the arbitration initiated by Specialty Bakeries pending a decision by the Court of Appeals on HalRob's appeal. Specialty Bakeries advised the AAA that it opposed any consolidation or stay. As a result, AAA informed counsel that it would neither consolidate nor stay the arbitration. In a letter dated June 4, 1997, AAA explained that “[a]bsent the agreement of all parties, applicable contractual provisions authorizing joint arbitrations, or a court order, the Association can not consolidate the parties' disputes claims.” The parties' franchise agreement requires arbitration of disputes by the AAA and specifically incorporates the Commercial Rules of the AAA. The agreement contains no provision authorizing joint or consolidated arbitrations. It reads in pertinent part: A. AGREEMENT TO ARBITRATE All disputes and claims under this Agreement, the rights and obligations of the parties hereto, your purchase of goods or other claims or causes of action relating to the performance of either party, and/or the purchase of the franchise shall be settled by arbitration at the office of the American Arbitration Association in Philadelphia, Pennsylvania, in accordance with the Federal Arbitration Act and the Commercial Rules of the American Arbitration Association. Judgment upon the award of the arbitrator may be entered in any court having jurisdiction thereof. This agreement to arbitrate shall survive any termination or expiration of this Agreement. *2 The parties also agreed to a first amendment which added the following: A. AGREEMENT TO ARBITRATE Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 114 of 136 Specialty Bakeries, Inc. v. Robhal, Inc., Not Reported in F.Supp. (1997) 1997 WL 379184 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 The following language is to be added to this Paragraph: Any arbitration award shall be final, binding, and non-appealable. The fees of the Association and the arbitrator shall be paid by the losing party as designated by the arbitrator. The arbitration hearing shall be conducted pursuant to the Federal Arbitration Act. In support of its motion for consolidation of the two arbitrations currently pending before AAA, HalRob argues that both matters involve the same operative facts and law, that is, the alleged breach by Specialty Bakeries of a non-competition agreement and HalRob's efforts to remedy this breach. It contends that consolidation will promote judicial economy and efficiency. The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–14, which is specifically referenced in the parties' franchise agreement, was promulgated “to overrule the judiciary's long-standing refusal to enforce agreements to arbitrate” and “to ensure judicial enforcement of privately made agreements to arbitrate.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219–20 (1985). The Supreme Court “reject[ed] the suggestion that the overriding goal of the Arbitration Act was to promote the expeditious resolution of claims.” Id. at 220. Rather, the statute evidences a “liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.” Moses H. Cone Mem'l Hosp. v. Mercury Constr., 460 U.S. 1, 24 (1983). Under § 4 of the FAA, it is the duty of a federal court, when there is jurisdiction, to determine arbitrability. 3 “The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Id. By the very terms of § 4 of the FAA, the court must enforce an arbitration clause. Dean Witter, 470 U.S. at 218. If the parties agreed in their contract to arbitrate, the court must order the parties to do so. Moses H. Cone, 460 U.S. at 20. The Court of Appeals for the Third Circuit has reiterated that the court's role generally ends there. 4 In its recent decision in Great Western Mortgage Corporation v. Peacock, 110 F.3d 222, 230–31 (3d Cir.1997), it stated: Once a dispute is determined to be validly arbitrable, all other issues are to be decided at arbitration. Since the purpose of the FAA is to ensure that agreements to arbitrate are enforced, a court compelling arbitration should preserve the remaining disputed issues for the arbitrator to decide. The FAA makes no provision for consolidation. Likewise, neither the franchise agreement itself nor the Commercial Rules of the AAA, adopted by the parties in their franchise agreement, specifically provides for consolidation. Instead, HalRob relies on the Federal Rules of Civil Procedure for the authority to do so. Rule 81(a)(3) of the Federal Rules of Civil Procedure states that “[i]n proceedings under Title 9, U.S.C., relating to arbitration [FAA] ... these rules apply only to the extent that matters of procedure are not provided for in those statutes.” Depending upon the scope and application of this rule, we may have the power to consolidate actions pursuant to Rule 42(a) which allows consolidation when there is a “common question of law or fact.” *3 HalRob directs this court to the case of Compania Espanola de Petroleos v. Nereus Shipping, 527 F.2d 966, 974–75 (2d Cir.1975), which held that a federal court has the power to order consolidation pursuant to these Federal Rules. This case was effectively overruled, however, by Government of the United Kingdom of Great Britain v. Boeing, 998 F.2d 68 (2d Cir.1993). In Boeing, the Second Circuit held that Supreme Court cases subsequent to Nereus, had “undermined our previous conclusion” in that case and therefore, “[t]o the extent our decision in Nereus is based on the Federal Rules of Civil Procedure and the ‘liberal purposes' of the [FAA], we hold that it is no longer good law.” Id. at 71, 74. 5 Current authorities conclude that Rule 81(a)(3), and through it all the Federal Rules, apply only to judicial proceedings, and not to proceedings before an arbitrator. See 14 James Wm. Moore et al., Moore's Federal Practice ¶ 81.05 (3d ed.1997); 4 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1015 (2d ed.1987). Wright and Miller observes that “[t]he federal rules do not govern the procedure in the hearings before the arbitrators, which, by agreement of the parties, normally is regulated by the American Arbitration Association's Commercial Arbitration Rules.” Several federal courts have held that absent the parties' agreement to the contrary, the Federal Rules cannot be used to Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 115 of 136 Specialty Bakeries, Inc. v. Robhal, Inc., Not Reported in F.Supp. (1997) 1997 WL 379184 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 order consolidation of arbitrations. Boeing, 998 F.2d at 73–74; Weyerhaeuser Co. v. Western Seas Shipping Co., 743 F.2d 635, 637 (9th Cir.), cert. denied, 469 U.S. 1061 (1984); In re Arbitration Between Coastal Shipping Ltd. and S. Petroleum Tankers Ltd., 812 F.Supp. 396, 403 (S.D.N.Y.1993); PaineWebber, Inc. v. Fowler, 791 F.Supp. 821, 825–26 (D.Kan.1992). 6 We agree. Rule 81(a)(3) cannot be invoked in conjunction with Rule 42(a) to consolidate matters before an arbitrator. HalRob next contends that we have the power under New Jersey law to consolidate the two arbitrations. It relies on the fact that paragraph 27 of the franchise agreement between the parties provides that it shall be construed according to the laws of that state. Thus, HalRob maintains that by applying New Jersey law we would simply be enforcing the terms of the franchise agreement. In Volt Information Sciences, Inc. v. Board of Trustees of the Leland Stanford Junior University, 489 U.S. 468 (1989), the Supreme Court discussed the role of state arbitration law in a contract with an arbitration clause. Volt involved a construction contract between Stanford University and Volt, an electrical company. Id. at 470. Their contract provided for arbitration in the event of a dispute, pursuant to the Construction Industry Arbitration Rules of the AAA. Id. It also contained a choice of law clause stating that “[t]he Contract shall be governed by the law of the place where the Project is located.” Id. In that case it was California. When a dispute arose under the contract, Volt filed a demand for arbitration against the university. Id. The university, however, filed suit against Volt and others, with whom it did not have arbitration agreements, in California Superior Court. Id. at 470–71. Pursuant to a California statute, Volt sought to compel arbitration, while the university petitioned the court to stay the arbitration pending the outcome of the litigation. Id. at 471. Although the FAA contains no provision providing for the stay of arbitration, California law “permits a court to stay arbitration pending resolution of related litigation between a party to the arbitration agreement and third parties not bound by it, where ‘there is the possibility of conflicting rulings on a common issue of law or fact.’ ” Id. Because of this California statute, the California state court stayed the arbitration. Volt appealed, eventually reaching the United States Supreme Court. *4 The Supreme Court held that the FAA does not “occupy the entire field of arbitration.” Id. at 477. While the FAA preempts state law requiring a judicial forum to resolve disputes which parties contracted to resolve through arbitration, it did not preempt California law in this instance. Id. at 478–79. The Court reasoned that the parties agreed in their contract to the applicability of state law. Id. at 479. In this case, state law provided simply for a stay of arbitration under certain circumstances. Id. at 471. The Supreme Court explained: Interpreting a choice-of-law clause to make applicable state rules governing the conduct of arbitration —rules which are manifestly designed to encourage resort to the arbitral process—simply do not offend the rule of liberal construction set forth in Moses H. Cone, nor does it offend any other policy embodied in the FAA. Id. at 476. Specialty Bakeries and HalRob, as noted, have incorporated New Jersey law into their franchise agreement. According to one state intermediate appellate court case, cited by HalRob, New Jersey “courts find no difficulty in consolidating arbitration proceedings where all parties are signatory to arbitration.” See, e.g., Manchester Township Bd. of Educ. v. Thomas P. Carney, Inc., 489 A.2d 682, 689 (N.J.Super.Ct.App.Div.1985). 7 Manchester involved a dispute over a defective building. Id. at 683–84. The plaintiff board of education asked the court to consolidate its arbitration against the contractor with a court action it brought against the architect of the building. Id. at 688. The New Jersey court, however, declined to order consolidation because “a contractual right to arbitrate cannot be abridged in favor of consolidation with judicial proceedings.” Id. at 689. The New Jersey Arbitration Act, N.J. Stat. Ann. §§ 2A:24– 3 (West 1997) et seq., it should be noted, does not mention consolidation. Rather, it mirrors the FAA and provides that a court may “direct that arbitration proceed in the manner provided for in the agreement.” Id. § 2A:24–3. We need not decide whether New Jersey law allows a court to order consolidation or whether our venture into this arena is contrary to the Court of Appeals' admonition Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 116 of 136 Specialty Bakeries, Inc. v. Robhal, Inc., Not Reported in F.Supp. (1997) 1997 WL 379184 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 in Great Western. Even if we have the power law to order consolidation, we would not do so here. In our view, the two arbitrations are discrete. The decision in one will not affect the decision of the other. The issue in the first arbitration is whether HalRob breached the franchise agreement to arbitrate the parties' dispute and therefore whether HalRob owes attorney's fees and costs to Specialty Bakeries. This determination has no effect upon the issue in the second arbitration, that is, whether or not Specialty Bakeries has breached the non-competition portion of the franchise agreement and owes damages to HalRob. Moreover, under the AAA rules, 8 HalRob had the opportunity in March, 1997 to file a counterclaim against Specialty Bakeries in the first arbitration. For tactical reasons it refused to do so. If HalRob had timely filed a counterclaim, the two arbitration issues would have been decided together. However, the door is now closed. HalRob in essence is asking this court to order what it had a chance at one point to achieve on its own. We see no reason to extricate HalRob from a situation of its own choosing now that it sees no advantage for itself in its earlier decision. To do so would be detrimental to Specialty Bakeries. To grant HalRob the relief it seeks would simply cause further delay in this already much delayed matter. The motion for consolidation will be denied. *5 HalRob also asks this court to stay Specialty Bakeries' arbitration, consolidated or not, until the Court of Appeals has ruled upon its appeal of our April 15, 1997 order enjoining HalRob from proceeding with its action in the New Jersey Superior Court. Without a stay, HalRob contends that the arbitrator would be guessing what the Third Circuit will decide and may guess wrong. HalRob baldly asserts, without any supporting affidavits or other evidence, that an arbitration decision in favor of Specialty Bakeries prior to the Third Circuit's decision would force it into bankruptcy or out of business. Therefore, any arbitration “will be rendered a hollow formality and the essence of the Order compelling arbitration eviscerated.” HalRob Motion to Consolidate Proceedings before AAA at ¶ 21. Specialty Bakeries disputes this, contending that HalRob's effort is just another in a long line of maneuvers to avoid or delay arbitration. The avoidance of piecemeal litigation is simply not enough to stay an arbitration. See Dean Witter, 470 U.S. at 217; Moses H. Cone, 460 U.S. at 20. Moreover, the fact that ongoing litigation may affect any part of an arbitration is not sufficient reason either. First Fidelity Bancorp. v. National Union Fire Ins. Co. of Pittsburgh, No. CIV. A. 90–1866, 1990 WL 167642 at *5 (E.D.Pa. Oct. 30, 1990); Gotshall v. A.G. Edwards & Sons, Inc., 701 F.Supp. 675, 678 (N.D.Ill.1988); Sentry Ins. v. Pearl, 662 F.Supp. 1171, 1174 (E.D.Pa.), aff'd, 833 F.2d 307 (3d Cir.1987). Finally, neither the FAA nor the New Jersey Arbitration Act provides for a stay of arbitration pending litigation. Again, even if we had the authority to do so, we would not exercise it here. The matter should move forward in accordance with the AAA rules and procedures without judicial interference. HalRob's request for a stay will be denied. In conclusion, we note that it is the action of HalRob itself which has brought on any financial difficulties enumerated here. Specialty Bakeries simply seeks attorney's fees and costs as a result of HalRob's decision improperly to seek relief through the courts rather than comply with the franchise agreement to arbitrate. If HalRob had sought arbitration in a timely manner in early 1997, Specialty Bakeries would not have needed to file suit in this court to compel arbitration, its litigation fees and costs would not have been incurred, and the underlying disputes would undoubtedly already have been resolved. As the court has emphasized on a number of prior occasions, all parties, including HalRob, concede that the underlying disputes are subject to arbitration in accordance with the parties' franchise agreement. Nevertheless, HalRob seems to be doing everything it can to avoid its contractual obligation to arbitrate, with needless expense and waste of time for all concerned. ORDER AND NOW, this 24th day of June, 1997, for the reasons set forth in the accompanying Memorandum, the motion of defendants RobHal, Inc. and HalRob, Inc. to consolidate proceedings before the American Arbitration Association and for a stay of arbitration is DENIED. 1 On May 7, 1997, this court denied HalRob's motion to stay its April 15, 1997 order pending appeal. 2 Rule 9 of the Commercial Arbitration Rules states that any arbitrations under $50,000 shall use the Expedited Procedures specified in the Rules. Parties Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 117 of 136 Specialty Bakeries, Inc. v. Robhal, Inc., Not Reported in F.Supp. (1997) 1997 WL 379184 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 may agree to use the Expedited Procedures for claims over $50,000. 3 Section 4 states in pertinent part that “[t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4 (emphasis added). 4 Under the FAA, a court, of course, may act in certain narrowly defined situations not applicable here. They include: (1) conducting proceedings for a stay of a lawsuit pending arbitration; (2) compelling arbitration; (3) appointing arbitrators; (4) confirming an arbitration award; (5) vacating an arbitration award; and (6) modifying or correcting an arbitration award. See 9 U.S.C §§ 3–5, 9–11. 5 HalRob's initial brief also relied upon a Third Circuit case which had ordered consolidation of three parties in a contractor/subcontractor dispute. Gavlik Constr. Co. v. H.F. Campbell Co., 526 F.2d 777, 788–89 (3d Cir.1975), overruled on other grounds by Zosky v. Boyer, 856 F.2d 554 (3d Cir.1988). However, Gavlik did not concern consolidation under the FAA, but under Pennsylvania state law. Id. at 785. Because the FAA was not involved, the court did not reach “the issue of whether the district court had power to order consolidation under the Federal Rules of Civil Procedure.” Id. at 789 n. 28. 6 HalRob argues that these cases all refer to consolidation of different parties to different arbitration agreements. It is correct that none of the cases is identical to the instant dispute. However, HalRob misses the central point of these cases. Absent a contractual provision for consolidating arbitrations, the court should not do so. 7 HalRob also cites a New Jersey Supreme Court case for the proposition that it approves of consolidation of arbitrations. Gelber v. Zito Partnership, 688 A.2d 1044, 1046 (N.J.1997). The case says nothing of the sort. Gelber concerned a homeowner who brought a court action against his architect but failed to inform him and the court of an arbitration proceeding against the contractor as well. Id. at 1044. The court held that this failure may preclude the homeowner from suing the architect. Id. at 1047–48. The court stated that had the architect been informed of the arbitration, it might have chosen to invoke the arbitration clause in its contract with the homeowner. Id. at 1046. In dicta, without analyzing current law on the subject or Supreme Court precedent, the court stated that “[i]n that circumstance, a court might have ordered consolidation of the two arbitrations.” Id. (emphasis added). 8 Rule 6 entitled “Initiation under an Arbitration Provision in a Contract” of the Commercial Arbitration Rules states in pertinent part: The AAA shall give notice of such filing to the respondent or respondents. A respondent may file an answering statement in duplicate with the AAA within ten days after notice from the AAA, in which event the respondent shall at the same time send a copy of the answering statement to the claimant. If a counterclaim is asserted, it shall contain a statement setting forth the nature of the counterclaim, the amount involved, if any, and the remedy sought. [Emphasis added] All Citations Not Reported in F.Supp., 1997 WL 379184 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 118 of 136 P Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 119 of 136 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 10919559 Only the Westlaw citation is currently available. NON–PRECEDENTIAL DECISION— SEE SUPERIOR COURT I.O.P. 65.37 Superior Court of Pennsylvania. 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., Appellants. No. 1346 MDA 2012. | Filed June 17, 2014. 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. BEFORE: DONOHUE, J., OTT, J., and PLATT, J. * * Retired Senior Judge assigned to the Superior Court. MEMORANDUM BY OTT, J.: *1 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 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 1 We will refer to Stiles, Armstrong, and Fiorentino collectively as the “Residents.” 2 Armstrong no longer resides at the Property. 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 the wells (“the Wells”) within approximately three miles of the Property and water supply. 3 The Wells were identified as # 831081, # 627644, # 831206, and # 831205. On January 12, 2010, Stiles entered into an oil and gas 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 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. On October 27, 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. 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 120 of 136 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 its principal place of business in Oklahoma City, Oklahama. 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 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. *2 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' 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 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 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. 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 ‘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: 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 to arbitrate exists between the parties. Id. Second, if the trial court Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 121 of 136 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 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). *3 Pittsburgh Logistics Sys., Inc. v. Prof'l Transp. & Logistics, Inc., 803 A.2d 776, 779 (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)). “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., 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, 54 A.3d 921, 928 (Pa.Super .2012); see also Standard Venetian Blind Co. v. American Empire Ins. Co., 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 is not a signatory to the contract). Smay v. E.R. Stuebner, Inc., 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. *4 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, underlying the land herein leased, together with such exclusive rights as may be necessary or convenient for Lessee, at its election, to explore for, Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 122 of 136 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 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 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 reenter existing wells, including necessary location, roadway and pipeline easements 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]. *5 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 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 Lease between Stiles and [Chesapeake] that damaged [the Residents]. Further, nothing in Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 123 of 136 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 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 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 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. *6 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 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 8 See State Farm Fire and Casualty Company, 54 A.3d at 928. 9 We note because the parties are at the 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. 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., 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 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 124 of 136 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 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 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. *7 Muhlenberg Township, 333 A.2d at 186 (quotation 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, 328 A.2d 498 (Pa.1974) and Smay, supra, for the argument that the arbitration clause was framed in the broadest language and therefore, the scope of the provision was unlimited. Chesapeake's Brief at 10. However, again, these arbitration clauses 10 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. 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) ].”) 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. All Citations Not Reported in A.3d, 2014 WL 10919559 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 125 of 136 Q Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 126 of 136 Upper Lakes Towing Co. v. ZF Padova SpA, Not Reported in F.Supp.2d (2009) 2009 WL 4730762 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2009 WL 4730762 Only the Westlaw citation is currently available. United States District Court, W.D. Michigan, Northern Division. UPPER LAKES TOWING CO., Plaintiff, v. ZF PADOVA SPA, Defendant. No. 2:08–CV–63. | Dec. 4, 2009. West KeySummary 1 Alternative Dispute Resolution Persons Affected or Bound Propeller manufacturer could not compel shipping company to arbitrate when manufacturer was not party to the contract. Shipping company purchased a propeller made by propeller manufacturer from a distributor through a contract containing an arbitration clause. When installed, the propeller caused damage to shipping company's vessel. Propeller manufacturer sought to enforce the arbitration clause but could not successfully due so since it was not a part to the contract containing the provision. The arbitration clause covered only parties to the contract. 9 U.S.C.A. §§ 1, 202. Cases that cite this headnote Attorneys and Law Firms Vincent R. Petrucelli, Petrucelli & Petrucelli PC, Iron River, MI, for Plaintiff. Glenn W. Smith, Bensinger Cotant & Menkes PC, Marquette, MI, John Joseph Hunter, Jr., Thomas J. Schank, Hunter & Schank Co., LPA, Toledo, OH, for Defendant. OPINION ROBERT HOLMES BELL, District Judge. *1 This is a product liability action brought by Plaintiff Upper Lakes Towing Co. (“Upper Lakes”), a U.S. entity, against Defendant ZF Padova SpA (“ZF”), an Italian entity. Before the Court is a motion by Defendant ZF to dismiss the case for lack of subject matter jurisdiction or, in the alternative, to compel arbitration. (Dkt. No. 52.) The Court heard oral argument on the motion on November 3, 2009. For the reasons that follow, Defendant's motion will be denied. I. Factual Background On or about June 30, 2005, Plaintiff Upper Lakes entered into a contract with MaK Americas, Inc. (“MaK”) for the purchase of two diesel engines, two generators, and a pitch propeller for Plaintiff's tug-and-barge, the Joseph H. Thompson Jr. (the “MaK Contract”). After the purchase of the equipment, a third party installed the equipment at a shipyard in Pennsylvania. Plaintiff contends that when the propeller was put into use, it started leaking fluid into the hull of the ship and caused excessive vibration, both of which damaged Plaintiff's vessel. Defendant ZF designed and manufactured the pitch propeller. Plaintiff filed suit on March 3, 2008, alleging (1) negligence in the design and manufacture of the pitch propeller, and/or negligence in providing instructions or warnings regarding the propeller, and (2) strict liability for selling a defective pitch propeller. Plaintiff's complaint alleges admiralty and diversity jurisdiction as the bases for subject matter jurisdiction. Defendant argues that this case should be dismissed for lack of subject matter jurisdiction because the dispute is subject to mandatory arbitration. The MaK Contract requires that disputes related to the agreement be resolved exclusively through arbitration: All disputes arising between both Parties in connection with the present contract shall be settled through friendly consultations between both Parties. In case no agreement can be achieved through Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 127 of 136 Upper Lakes Towing Co. v. ZF Padova SpA, Not Reported in F.Supp.2d (2009) 2009 WL 4730762 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 consultations, it shall exclusively be submitted to arbitration for settlement under the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with said rules. (Dkt. No. 52, Def.'s Mot. to Dismiss, Ex. A, MaK Contract § 17). Defendant is not a party to the MaK Contract. However, MaK entered into a purchase agreement in July 2005 with its affiliate, Caterpiller Motoren GmbH & Co. (“Caterpiller Agreement”) that is virtually identical to the MaK Contract, including the arbitration provision. (Ex. B.) MaK also entered into a “basis for consortium agreement” in September 2005 with Caterpiller, under which MaK agreed to be the lead for an “undisclosed consortium” to fulfill the terms of the MaK Contract with Plaintiff (“Consortium Agreement”). (Ex. D.) Defendant contends that Caterpiller “passed on” or assigned to Defendant the part of the Consortium Agreement related to the pitch propeller by a “transfer of order” dated October 6, 2005. (Ex. E.) To summarize, Plaintiff entered into a purchase agreement with MaK (the MaK Contract), MaK entered into a purchase agreement and consortium agreement with Caterpiller, and Caterpiller passed on its obligations with respect to the pitch propeller to Defendant. II. Analysis *2 Arbitration agreements are regulated by the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. The FAA provides that, for any suit that is referable to arbitration, the Court will stay proceedings while the matter is resolved. 9 U.S.C. § 3. However, the parties agree that the MaK Contract also falls under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), ratified at 9 U.S.C. § 202 et seq. Generally, the Convention applies to arbitration agreements between citizens of the United States and citizens of other countries. Id . Where such an agreement requires arbitration, the Court has the power to refer it to arbitration. 9 U.S.C. § 206. As between the FAA and the Convention, the Convention takes precedence and the FAA applies to the extent that it does not conflict with the terms of the Convention. See 9 U.S.C. § 208 (“Chapter 1 [of Title 9, the FAA] applies to actions and proceedings brought under this chapter to the extent that chapter is not in conflict with this chapter or the Convention as ratified by the United States.”). In evaluating a motion to compel arbitration, the first step is to determine whether the dispute is arbitrable, “ ‘meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of the agreement .’ “ Nestle Waters N. Am., Inc. v. Bollman, 505 F.3d 498, 502 (6th Cir.2007) (quoting Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir.2003)). In the instant case, the issue is whether the scope of the arbitration provision in the MaK Contract includes a dispute between Plaintiff and a nonparty to the agreement. Arbitration language is to be interpreted “in light of the strong federal policy favoring arbitration, resolving any doubts as to the parties' intentions in favor of arbitration.” Id. at 503. However, a party cannot be compelled to arbitrate a dispute which it has not agreed to submit to arbitration. Id. at 504. While ambiguities in the language of the agreement should be resolved in favor of arbitration, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated. EEOC v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) (citations omitted). The arbitration provision in the MaK Contract is limited to “disputes arising between both Parties....” (MaK Contract § 17) (emphasis added). It does not say “all disputes” without qualification or even “all disputes arising in connection with the contract.” “Courts have consistently drawn a distinction between arbitration clauses specifically identifying the parties to which it applies, and a broader form of arbitration clause which does not restrict the parties.” In re Southwind Shipping Co., 709 F.Supp. 79, 82 (S.D.N.Y.1989); see In re Continental UK Ltd. v. Anagel Confidence Compania Naviera, S.A., 658 F.Supp. 809, 810 (S.D.N.Y.1987) (denying a motion to compel arbitration by a non-signatory cargo owner and holder of bill of lading in a dispute with a non-signatory vessel owner where the provision applied to disputes between “owners” and “charterers”); Parkway Dodge, Inc. v. Yarbrough, 779 So.2d 1205, 1209–10 (Ala.2000) Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 128 of 136 Upper Lakes Towing Co. v. ZF Padova SpA, Not Reported in F.Supp.2d (2009) 2009 WL 4730762 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 (preventing a non-signatory manufacturer from enforcing an arbitration provision that applied to disputes between “dealer” and “purchaser”). The arbitration provision in the MaK Contract is not the “broader form” of arbitration clause. The Court notes that the MaK Contract abounds with references to “Vendor” (MaK) and “Buyer” (Plaintiff). The arbitration provision itself is limited to disputes between the “Parties,” which is expressly defined in the agreement as the combination of “Buyer” and “Vendor.” Defendant is not a “party” to the MaK Contract in the generic sense, nor is it a “Party” as that term is defined in the agreement. Accordingly, the plain text of the agreement indicates that disputes between Plaintiff and Defendant are not included within the scope of the arbitration clause. The Court must enforce the agreement according to its plain meaning. 1 See EEOC, 534 U.S. at 294. 1 The MaK Contract contains a choice-of-law provision indicating that the agreement is governed by the laws of Switzerland. (MaK Contract § 17.) However, neither party cites Swiss law on this issue or asserts that Swiss law would require a different interpretation of the arbitration clause. *3 Defendant cites cases in which courts appear to have allowed an arbitration agreement to be enforced by or against a non-signatory even though that agreement was limited by its terms to disputes between the parties to the agreement. See Contec Corp. v. Remote Solution Co., Ltd., 398 F.3d 205, 208 (2d Cir.2005) (examining arbitration provision governing disputes that “both parties” or “the parties” cannot resolve); Shaw Group, Inc. v. Triplefine Int'l Corp., 322 F.3d 115, 120 (2d Cir.2003) (examining arbitration provision governing disputes between “you” and “us”). However, in both of the foregoing cases, the non-signatories stood in the shoes of the original parties to the agreement, either as successors in interest or by assumption. See Shaw Group, 322 F.3d at 120 n. 2 (noting that the non-signatory succeeded to the rights and obligations of the signatory); Contec Corp., 398 F.3d at 207 (noting that one signatory changed its name and the other signatory changed its corporate form without altering its ownership or its business relationship with the other signatory). Defendant argues that it can enforce the arbitration provision because it stands in the shoes of MaK, but this argument is unsupported. Defendant contends that the obligations of MaK with respect to the MaK Contract were “passed on” or assigned to ZF by virtue of the Consortium Agreement between MaK and Caterpiller and the transfer order between Caterpiller and Defendant. However, even if MaK delegated to Defendant certain obligations under the MaK Contract, there is no indication that Defendant assumed any of MaK's rights under that agreement, such as the right to enforce the arbitration clause. Defendant also argues that, even if the MaK Contract does not include Defendant as a party, the contract references Defendant 2 and contemplates Defendant as a third-party beneficiary of the agreement. Defendant argues that because Plaintiff was aware that Defendant would be supplying parts pursuant to the MaK Contract, Plaintiff should be required to arbitrate a dispute with Defendant that is arguably related to that contract. However, this argument cuts against Defendant. The fact that the parties to the MaK Contract were aware of Defendant's role when they entered into the agreement suggests that the arbitration provision, as drafted, was intended to exclude Defendant. Rather than agree to a provision applying broadly to all disputes arising in connection with the agreement, including disputes involving the members of MaK's consortium or disputes involving the manufacturer or original supplier of the purchased parts, the parties to the MaK Contract agreed to an arbitration clause that is expressly limited to disputes between the “Buyer” and the “Vendor.” To allow Defendant to enforce this provision against Plaintiff would be inconsistent with the plain meaning of the text and would “override the clear intent of the parties[.]” EEOC, 534 U.S. at 294. For the foregoing reasons, therefore, the Court concludes that the arbitration provision is limited to disputes between Plaintiff and MaK; it does not cover the instant dispute between Plaintiff and Defendant. 2 The specifications attached to and incorporated as part of the agreement refer to “ZF Marine Propulsion Systems.” (MaK Contract, App'x 1 § 19.1.4.) *4 Defendant raises two additional arguments in its reply brief. (Dkt. No. 61.) First, it argues that, because the arbitration provision in the MaK Contract references the Rules of Arbitration of the International Chamber of Commerce, the parties to the MaK Contract agreed to have issues regarding the arbitrability of disputes referred to an arbitrator, citing Apollo Computer, Inc. v. Berg, 886 F.2d 469, 473 (1st Cir.1989) (“By contracting to have all disputes resolved according to the Rules of the ICC ... Apollo agreed to be bound by Articles 8.3 and Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 129 of 136 Upper Lakes Towing Co. v. ZF Padova SpA, Not Reported in F.Supp.2d (2009) 2009 WL 4730762 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 8.4. These provisions clearly and unmistakably allow the arbitrator to determine her own jurisdiction when, as here, there exists a prima facie agreement to arbitrate whose continued existence and validity is being questioned.”). Defendant's argument is not persuasive. At issue in Apollo Computer was whether the non-signatory could enforce an arbitration clause in an agreement that had terminated and that, according to the signatory, had been invalidly assigned to the non-signatory seeking to enforce it. Id. at 472. The court held that this issue should be decided by the ICC arbitrator rather than the court. Id. Unlike Apollo Computer, however, Defendant has not shown that it was assigned any rights under the MaK Contract. Thus, Defendant has not made a prima facie showing that there exists an agreement between Plaintiff and Defendant to arbitrate this dispute. Moreover, the arbitration provision at issue in Apollo Computer was a broad form of provision covering all disputes related to the contract; it was not limited to disputes between the parties the agreement. Id. at 474. Thus, when the arbitration provision in the MaK Contract is read in its entirety, it does not “clearly and unmistakably” evince an intent to refer to an arbitrator the issue of whether it applies to a dispute between Plaintiff and a non-party to the agreement. See AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (“Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.”). Finally, Defendant suggests that the Consortium Agreement requires Plaintiff to arbitrate this dispute. Though Plaintiff is not a party to that agreement, Defendant contends that Plaintiff should be estopped from refusing to arbitrate, citing Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411 (4th Cir.2000). In that case, the court noted that a non-signatory could be estopped from refusing to comply with an agreement to arbitrate where it received a “direct benefit” from the contract or where it has “consistently maintained that other provisions of the same contract should be enforced to benefit him.” Id. at 418. The non- signatory plaintiff in International Paper alleged that the defendant failed to honor the warranties in the agreement, and the court determined that the plaintiff should be estopped from refusing to arbitrate because the plaintiff's “entire case hinge[d]” on its asserted rights under that contract. Id. In contrast to International Paper, there is no indication that Plaintiff relies on or seeks to enforce any asserted rights in the Consortium Agreement. The complaint does not reference the Consortium Agreement and there is no indication that Plaintiff's product- liability claims hinge on any rights in that agreement. Thus, Defendant has not shown that Plaintiff should be estopped from refusing to arbitrate under the Consortium Agreement. *5 For the foregoing reasons, therefore, Defendant has not shown that this matter should be dismissed or referred to arbitration. III. Conclusion Because the arbitration provision in the MaK Contract is, by its own terms, limited to disputes between the parties to that agreement, and because Defendant has not shown that it has a right to compel Plaintiff to arbitrate under any other agreement, the Court will deny Defendant's motion. The Court is not unreceptive to Defendant's concern that Plaintiff filed a product-liability action against Defendant which may be better suited as an action against MaK for breach of the MaK Contract. Nevertheless, Plaintiff is the master of its complaint with respect to the claims pleaded and the parties sued. By its own admission, Plaintiff has “limited its claims against ZF to those arising outside the bounds of its contract with MaK.” (Dkt. No. 53, Pl.'s Resp. in Opp'n to Mot. to Dismiss 17.) The Court has not been asked to review the merits of Plaintiff's claims against Defendant. If those claims are insufficient under the facts of this case, Plaintiff must live with the consequences of its choices, just as Defendant must live with the consequences of its choice of contractual rights and remedies for this type of dispute. Unfortunately (for Defendant), it appears that those rights do not include the right to compel Plaintiff to arbitrate this dispute. An order will be entered that is consistent with this opinion. All Citations Not Reported in F.Supp.2d, 2009 WL 4730762 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 130 of 136 R Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 131 of 136 JAN L. VOSBURG and JENNIFER L. VOSBURG, Plaintiffs, v. CHESAPEAKE APPALACHIA, L.L.C., Defendants. CIVIL ACTION NO. 3:11-CV-1615 UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA 2011 U.S. Dist. LEXIS 155364 November 16, 2011, Decided November 16, 2011, Filed COUNSEL: [*1] For Jan L. Vosburg, Jennifer L. Vosburg, Plaintiffs: Todd J. O'Malley, O'Malley & Langan P.C., Scranton, PA; William S. Friedlander, Friedlander, Friedlander & Assoc., Waverly, NY. For Chesapeake Appalachia, L.L.C., Defendant: David R. Fine, K&L Gates LLP, Harrisburg, PA. JUDGES: RICHARD P. CONABOY, United States District Judge. OPINION BY: RICHARD P. CONABOY OPINION MEMORANDUM Here we consider Defendant's Motion to Compel Arbitration or, in the Alternative, to Dismiss Counts II and III and the Demands for Punitive Damages and Attorneys' Fees (Doc. 6). Defendant filed this motion on October 6, 2011, accompanied by a supporting brief (Doc. 7). Plaintiffs filed a responsive brief on October 19, 2011 (Doc. 8), and Defendant filed a reply brief on November 4, 2011 (Doc. 9). Therefore this matter is fully briefed and ripe for disposition. For the reasons discussed below, we grant Defendant's motion. I. Background1 1 In their opposition brief (Doc. 8), Plaintiffs neither provide a factual background section nor present any disagreement with the Factual and Procedural Background section of Defendant's supporting brief (Doc. 7 at 1-4). Therefore, the factual background is derived from Plaintiffs' Complaint (Doc. 1) and Defendant's [*2] Brief in Support of Defendant's Motion to Compel Arbitration or, in the Alternative, to Dismiss Counts II and III and the Demands for Punitive Damages and Attorney's Fees (Doc. 7 at 1-4). Plaintiffs commenced this action on August 29, 2011, with the filing of a three count Complaint. (Doc. 1.) Count I is a Declaratory Judgment Action pursuant to 28 U.S.C. § 2201 with which Plaintiffs seek a declaration that the Oil and Gas Lease between Plaintiffs and Defendant is no longer in effect in that "the primary term has expired and no operations sufficient to extend the Lease have been conducted by the Lessee or its successor on the leasehold lands or on premises unitized under the terms of the Lease." (Doc. 1 at 5.) Count II is a state law claim for Slander of Title. (Doc. 1 at 9.) Count III is a state law claim for Breach of Covenant of Good Faith and Fair Dealing. (Doc. 1 at 10.) In addition to declaratory relief, Plaintiffs seek compensatory damages, punitive damages, attorneys fees and further costs. (Doc. 1 ¶¶ 42, Page 1 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 132 of 136 50, 51, 61, 62.) Defendant is the successor to Columbia Natural Resources, the company with which Plaintiff entered into a natural-gas Lease. (Doc. 7 at 1.) The Lease provides [*3] for a primary term of five years, beginning on January 15, 2006, and ending on January 15, 2011. (Doc. 1 ¶ 32; Doc. 7 at 1.) It provides that the lease term would be extended "for as long thereunder as operations are conducted on the Leasehold in search of or in production of oil, gas, or their constituents, or for as long as a well capable of production is located on the Leasehold . . . ." (Doc. 1 ¶ 32.) The Lease also contains a provision which allows for the Leasehold, or a portion thereof, to be placed in a unit, a practice whereby a number of leaseholds are gathered into a unit and each lessor is entitled to a proportionate share of royalties. (Doc. 1 ¶ 34; Doc. 7 at 2 & n.1.) The unitization provision states that "the drilling, operation in preparation for drilling, production from, or payment for Royalty, Shut-in Royalty, or Delay in Marketing for a well on such unit shall have the same effect upon the terms of this Lease as if a well were located on the Leasehold." (Doc. 1 ¶ 34.) On January 6, 2011, Defendant filed a unitization declaration with the Bradford County Recorder of Deeds. (Doc. 1 ¶ 18.) The document, titled "Declaration and Notice of Pooled Unit, DGSM Unit," was executed [*4] on or about January 4, 2011, in Oklahoma by Henry J. Hood, identified as "Senior Vice President - Land and Legal & General Counsel" of Defendant Chesapeake. (Id.) Plaintiffs allege that Defendant filed the unitization declaration "negligently and/or in bad faith, on the eve of expiration of the five-year term of plaintiffs' 'Oil and Gas Lease" and with no drilling, 'operations' or other conduct sufficient to extend the Lease then having been performed either on the leasehold lands or in the designated Unit." (Doc. 1 ¶ 20.) Plaintiffs also allege that in the ten-day period between the recording of the unitization declaration and the expiration of the primary term of the lease, Defendant conducted no further activities which would have extended the lease. (Doc. 1 ¶ 23.) The Lease also contains an Arbitration provision which states the following. In the event of a disagreement between Lessor and Lessee concerning this lease, performance thereunder, or damages created by Lessee's operations, settlement shall be by panel of three disinterested arbitrators. Lessor and Lessee shall appoint and pay the fee of one each, and the two so appointed shall appoint the third, whose fee shall be borne [*5] equally by Lessor and Lessee. The award shall be by unanimous decision of the arbitrators and shall be final. (Doc. 1-2 at 3-4.) Defendant makes four arguments with this motion to dismiss. First Defendant argues the Court should stay this case and compel Plaintiffs to arbitrate their claims in accordance with the lease's arbitration provision. (Doc. 7 at 3.) Defendant alternatively argues that the Court should dismiss Counts II and III and dismiss the demands for punitive damages and attorneys fees. (Id.) As noted above, Defendant's motion is fully briefed and ripe for disposition. II. Discussion Defendant first argues the Court should stay the case and compel arbitration. For the reasons discussed below, we agree. Both Federal and Pennsylvania law strongly favor enforcement of arbitration provisions. 2 Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 82, 123 S. Ct. 588, 154 L. Ed. 2d 491 (2002); Dodds v. Pulte Home Corp., 2006 PA Super 268, 909 A.2d 348, 351 (Pa. Super. 2006). [W]here the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that "[a]n 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 [*6] of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." AT & T Techs. Inc. v. Commc'n Workers of Am., 475 U.S. 643, 650, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986) Page 2 2011 U.S. Dist. LEXIS 155364, *2 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 133 of 136 (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960)). The Court added that such a presumption is particularly applicable where the arbitration clause is worded broadly. Id. Where an arbitration clause provides that "'any difference arising with respect to the interpretation of the contract or the performance of any obligation hereunder . . . .,'" the Court concluded that "'[i]n the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail." Id. (quoting Warrior & Gulf, 363 U.S. at 584-85). 2 Defendant notes this Court has held that Pennsylvania law applies when considering a motion to compel arbitration of disputes concerning an oil and gas lease for property in Pennsylvania. (Doc. 7 at 4 (citing Ulmer v. Chesapeake Appalachia, L.L.C., 2009 U.S. Dist. LEXIS 124650 at *2 (M.D. Pa. Jan. 16, 2009; 42 Pa. C.S. § 7301, et seq.)).) While Defendant questions this [*7] determination, it acknowledges that, for present purposes, "the dispute need not be resolved because both FAA and Pennsylvania law determine the scope of arbitration provisions similarly." (Doc. 7 at 5 n.2 (citing State Farm Mutual Automobile Insur. Co. v. Coviello, 233 F.3d 710, at 710 n.1.) The parties agree that a court uses a two-step process to determine the enforceability of an arbitration provision. (Doc. 7 at 5-6; Doc. 8 at 2-3.) First, the court must determine if a valid agreement to arbitrate exists. Messa v. State Farm Ins. Co., 433 Pa. Super. 594, 641 A.2d 1167, 1168 (Pa. Super. 1994). Second, if such an agreement exists, the court must decide if the dispute falls within the scope of the agreement. Id. Here the disagreement relates to the second prong. Plaintiffs initially assert that the primary term of the lease expired on January 15, 2011, and, therefore, the issue of arbitration is arguably moot. (Doc. 8 at 3.) However, following this assertion, Plaintiffs recognize that this Court has determined that an agreement to arbitrate does not expire with the expiration of the lease. (Doc. 8 at 3-4 (citing Beinlich v. Chesapeake Appalachia LLC, Civil No. 03:11-CV-566, 2011 U.S. Dist. LEXIS 154301).) With this recognition, Plaintiffs [*8] focus their argument on a challenge to the application of the arbitration provision to Plaintiffs' claims for tortious slander of title and bad faith arising from Defendant's filing of a unit declaration. (Doc. 8 at 4.) Plaintiffs cite Hazleton Area Sch. Dist. v. Bosak, 671 A.2d 277 (Pa. Commw. 1995), and Edelstein v. Martin, 2008 Phila. Ct. Com. Pl. LEXIS 77 (Ct. Comm. Pls. Philadelphia Co. 2008), in support of their position that the Court should not compel arbitration of Plaintiffs' tort claims. (Doc. 8 at 4.) Defendant counters with the assertion that the arbitration provision in the lease at issue requires arbitration of any disagreement "concerning this lease, performance thereunder, or damages created by Lessee's operations . . ." and that courts have held that this type of language should be construed broadly. (Doc. 9 at 2 (citing Hearon v. AstraZeneca LP, 02-3189, 2003 U.S. Dist. LEXIS 6628, (E.D. Pa. Mar. 24, 2003)).) Defendant further maintains that courts have held that tort claims arising from the same set of facts as arbitrable contract claims should be arbitrated when there is a broad arbitration provision. (Doc. 9 at 2 (citing U.S. Claims, Inc. v. Saffren & Weinberg, LLP., No. 07-0543, 2007 U.S. Dist. LEXIS 88022, at *18 (E.D. Pa. Nov. 30, 2007)).) After [*9] reviewing relevant caselaw, including the cases cited by the parties in support of their positions, the Court concludes that the facts of this case and the language in the arbitration provision indicate all of Plaintiffs' claims should be arbitrated. First, the language of this arbitration provision is broad and does not exclude tort claims related to the Lease. Thus, this is a case where the presumption of arbitrability is particularly applicable. AT & T Techs., 475 U.S. at 650. Further, we cannot say "with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. These findings require that doubts be resolved in favor of arbitration. Id. The arbitration clause in the Lease can be read to include Plaintiffs' slander of title and bad faith claims in that they concern the lease and performance thereunder. Though Plaintiff asserts that "[t]hese claims do not readily fit within the parameters" of this language (Doc. 8 at 4), the provision can be interpreted to cover the claims. Plaintiffs state their slander of title claim "rests on allegations of defendant's bad faith recording of a declaration of unitization on January [*10] 5, 2011, ten days before the five-year primary term of plaintiff's [sic] Page 3 2011 U.S. Dist. LEXIS 155364, *6 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 134 of 136 lease was to expire, and on defendant's failure, within the primary term of the lease, to conduct operations on the leasehold or the unitized lands sufficient to extend the lease past the primary term." (Doc. 8 at 6.) Thus, by Plaintiffs' own description of the grounds of the claim, the unitization and failure to conduct operations are matters "concerning this lease" in that they relate to Defendant's asserted inability to extend the lease beyond the primary term. Similarly, Plaintiffs' claim for breach of covenant of good faith and fair dealing is properly construed as "concerning this lease." Plaintiffs argue that their "grievance is, precisely, with the bad faith recording of the [unitization] declaration in light of defendant's failure and inability to develop the leasehold or the unit prior to the expiration of plaintiff's [sic] lease." (Doc. 8 at 13.) With this statement, Plaintiffs make clear it is the conditions of the Lease regarding unitization that give rise to Plaintiff's bad faith claim. Plaintiffs' further assertion that "[a]t the least, such claim is actionable as a breach of contract claim, . . [*11] . as a tortious breach of contract" (Doc. 8 at 13) reinforces our conclusion that this claim is "concerning this lease," the lease being the contract in this case. Our conclusion is consistent with those cases which have found that "where separate tort claims arise out of the same facts as the breach of contract claim, a broadly worded arbitration provision covers such claims." U.S. Claims, Inc. v. Saffren & Weinberg, Civil Action No. 07-0543, 2007 U.S. Dist. LEXIS 88022, 2007 WL 4225536, at *7 (E.D. Pa. Nov. 29, 2007) (citing CD Partners, LLC v. Grizzle, 424 F.3d 795, 800 (8th Cir. 2005); P & P Indus. v. Sutter Corp., 179 F.3d 861,871-72 (10th Cir. 1999); Nova CTI Caribbean v. Edwards, Civ. A. No. 03-5319, 2004 U.S. Dist. LEXIS 41, 2004 WL 35759, at *4 (E.D. Pa. Jan. 8, 2004); Troshak, II v. Terminix Int'l Co., L.P., Civ. A. No. 98-1727, 1998 U.S. Dist. LEXIS 9890, 1998 WL 401693, at *6 (E.D. Pa. July 2, 1998); Pa. Data Entry, Inc. v. Nixdorf Computer Corp., 762 F. Supp. 96 (E.D. Pa. 1990)). Here Plaintiffs' request for Declaratory Judgment in Count I of the Complaint (Doc. 1 at 5) is essentially a request for the Court to conclude that Defendant violated the terms of the Lease (breached the contract) when it filed the unitization declaration including part of Plaintiffs' [*12] leasehold without sufficient activity on the unitized land or leasehold to prevent the expiration of the Lease under the terms of the Lease. Therefore, although Plaintiffs' Complaint does not specifically include a breach of contract claim, the facts upon which the case is grounded are sufficiently analogous to such a claim that the Court properly applies the law set out above. 3 3 Plaintiff's cited cases do not persuade the Court otherwise. In Hazleton Area School District v. Bosak, the court specifically stated that the plaintiff "has not asserted claims against Bosak concerning agreements or their breach." 671 A.2d at 282. In Margolis Edelstein v. Martin, Plaintiff did not raise a breach of contract claim, 2008 Phila. Ct. Comm. Pl. LEXIS 77, at *2, and the court did not discuss the basis for its previous decision that the plaintiff's claims were not subject to the arbitration provision at issue, id. at *7-8. Therefore, both cases are distinguishable from this case where all of Plaintiffs' claims relate to language found in the Lease. III. Conclusion For the reasons discussed above, we conclude that Defendant properly requests that this case be stayed and that Plaintiffs be compelled [*13] to arbitrate all claims. Therefore, Defendant's Motion to Compel Arbitration or, in the Alternative, to Dismiss Counts II and III and the Demands for Punitive Damages and Attorneys' Fees (Doc. 6) is GRANTED. An appropriate Order follows. /s/ Richard P. Conaboy RICHARD P. CONABOY United States District Judge ORDER NOW, THEREFORE, THIS 16th DAY OF NOVEMBER 2011, FOR THE REASONS DISCUSSED IN THE ACCOMPANYING MEMORANDUM, IT IS HEREBY ORDERED THAT: 1. Defendant's Motion to Compel Arbitration or, in the Alternative, to Dismiss Counts II and III and the Demands for Punitive Damages and Attorneys' Fees (Doc. 6) is GRANTED; 2. Plaintiffs are compelled to arbitrate all claims contained in their Complaint Page 4 2011 U.S. Dist. LEXIS 155364, *10 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 135 of 136 (Doc. 1); 3. The Clerk of Court is directed to ADMINISTRATIVELY CLOSE this case, to be reopened by either party if such a need arises following arbitration. /s/ Richard P. Conaboy RICHARD P. CONABOY United States District Judge Page 5 2011 U.S. Dist. LEXIS 155364, *13 Case 4:16-cv-01345-MWB Document 73-1 Filed 06/27/17 Page 136 of 136
