Heck Family Partnership v. Accupac Acquisition Inc.

72 Pa. D. & C.4th 449
CourtPennsylvania Court of Common Pleas, Philadelphia County
DecidedMay 23, 2005
Docketno. 0007
StatusPublished

This text of 72 Pa. D. & C.4th 449 (Heck Family Partnership v. Accupac Acquisition Inc.) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Philadelphia County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Heck Family Partnership v. Accupac Acquisition Inc., 72 Pa. D. & C.4th 449 (Pa. Super. Ct. 2005).

Opinion

JONES II, J.,

This dispute arises from the sale of a business and certain related assets. As part of the sale, the parties executed various agreements, including a purchase agreement and an escrow agreement. The escrow agreement contains an arbitration provision and the purchasing agreement does not. Plaintiffs have filed the instant preliminary objections seeking to compel defendant’s counterclaim to arbitration pursuant to the terms of the escrow agreement. In response, defendant has filed a cross-petition to stay arbitration. For the reasons discussed below, plaintiffs’ preliminary objections are sustained and defendant’s counterclaim is remanded to arbitration. Defendant’s cross-petition to stay arbitration is denied.

BACKGROUND

Plaintiffs are the former owners of Accupac Inc., a now dissolved Pennsylvania corporation that provided outsourced material purchasing, manufacturing and packaging services to the pharmaceutical and personal care industries in the United States. Plaintiffs entered into a purchase agreement with defendant Acquisition.

[451]*451Pursuant to the terms of the purchase agreement, plaintiffs agreed to sell their business and certain related assets to defendant for approximately $30,000,000.

In addition to the purchase agreement, the parties also entered into an Indemnity Fund Escrow Account agreement (escrow agreement). Pursuant to the terms of the escrow agreement, defendant deposited $3 million in an escrow account. Absent timely receipt of a claim notice by defendant, the escrow funds were to be released to plaintiffs 18 months following the closing. The escrow agreement contains an arbitration provision.

On or about October 4, 2004, defendant submitted a claim notice to the escrow agent alleging plaintiffs breached certain representations and warranties made in connection with the sale of Accupac and that defendant’s damages exceeded the available amounts in the escrow agreement, and demanded release of the funds. In response, plaintiffs denied the allegations and objected to the release of the funds.

Plaintiffs subsequently filed a statement of claim with the AAA, seeking a declaration of entitlement to the release of the escrow money. Plaintiffs also commenced this action in equity seeking injunctive relief to prevent Acquisition from canceling plaintiffs’ shares of common stock and terminating plaintiffs’ entitlement to an appointed representative on Acquisition’s board of directors.1 On November 4, 2004, the court entered a stipulated order that protected plaintiffs’ interest as stockholders pending resolution of the parties’ disputes.

[452]*452In response to the equity action, defendant filed a counterclaim against plaintiffs based on plaintiffs’ alleged misrepresentations and breaches contained within the purchase agreement. Thereafter, plaintiffs filed preliminary objections to defendant’s counterclaim on the ground that the parties’ claims and disputes are subject to a mandatory agreement to arbitrate.

DISCUSSION

The issue presented is whether the arbitration clause embodied in the escrow agreement should be enforced. Pennsylvania law “favors settlement of disputes by arbitration as a means of promoting swift and orderly disposition of claims.” School District of Philadelphia v. Livingston-Rosenwinkel P.C., 690 A.2d 1321, 1322-23 (Pa. Commw. 1997) (citing Flightways Corp. v. Keystone Helicopter Corp., 459 Pa. 660, 662-63, 331 A.2d 184, 185 (1975)).

A court’s analysis of whether a claim is required to be arbitrated is limited. Our Superior Court has held:

“When one party to an agreement seeks to prevent another from proceeding to arbitration, judicial inquiry is limited to determining (1) whether a valid agreement to arbitrate exists between the parties and, if so, (2) whether the dispute involved is within the scope of the arbitration provision.” University Mechanical & Engineering Contractors Inc. v. Insurance Co. of North America, November term 2000, no. 1554 (October 28, 2002) (Sheppard, J.) (citing Midomo Co. Inc. v. Presbyterian Housing Development Co., 739 A.2d 180, 186 (Pa. Super. 1999) (quoting Smith v. Cumberland Group Ltd., 455 Pa. Super. 276, 283, 687 A.2d 1167, 1171 (1997))).

[453]*453Thus, some determinations relating to whether a case should be arbitrated are to be made by the court, but others are to be resolved by an arbitrator. “The question of whether the parties agreed to arbitrate, commonly referred to as ‘substantive arbitrability,’ is generally one for the courts and not for the arbitrators.... On the other hand, resolution of procedural questions, including whether the invocation of arbitration was proper or timely is left to the arbitrator.” Ross Development Co. v. Advanced Building Development Inc., 803 A.2d 194, 196 (Pa. Super. 2002).

For matters of substantive arbitrability, a court must apply two principles: “(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.” Midomo, 739 A.2d at 190. To apply both rules, the court should employ the rules of contractual construction, “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.” Midomo at 190-91.

Here, there are two agreements at issue — the purchasing agreement and the escrow agreement — but only the escrow agreement contains an arbitration clause. After reviewing the purchase agreement and the escrow agreement as well as taking into consideration the parties’ respective positions, this court finds that the defendant’s counterclaim should be remanded to arbitration.

[454]*454The first issue that must be resolved in determining whether defendant’s counterclaim is subject to arbitration is whether the purchase agreement and the escrow agreement are interrelated and interdependent or independent agreements.2 It is a general rule of contract law that, where two writings are executed at the same time and are intertwined by the same subject matter, they should be construed together and interpreted as a whole. There is not “any requirement that a contract be evidenced by a single instrument” and “[i]f contracting parties choose, they may express their agreement in one or more writings and, in such circumstances, the several documents are to be'interpreted together, each one contributing (to the extent of its worth) to the ascertainment of the true intent of the parties.” International Milling Co. v.

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Related

Flightways Corp. v. Keystone Helicopter Corp.
331 A.2d 184 (Supreme Court of Pennsylvania, 1975)
Midomo Co. v. Presbyterian Housing Development Co.
739 A.2d 180 (Superior Court of Pennsylvania, 1999)
Smith v. Cumberland Group, Ltd.
687 A.2d 1167 (Superior Court of Pennsylvania, 1997)
Ross Development Co. v. Advanced Building Development, Inc.
803 A.2d 194 (Superior Court of Pennsylvania, 2002)
School District of Philadelphia v. Livingston-Rosenwinkel, P.C.
690 A.2d 1321 (Commonwealth Court of Pennsylvania, 1997)
International Milling Co. v. Hachmeister, Inc.
110 A.2d 186 (Supreme Court of Pennsylvania, 1955)

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Bluebook (online)
72 Pa. D. & C.4th 449, Counsel Stack Legal Research, https://law.counselstack.com/opinion/heck-family-partnership-v-accupac-acquisition-inc-pactcomplphilad-2005.