Interstate Fire Protection v. Repal Construction

• Court: Superior Court of Pennsylvania
• Decided: December 15, 2014
• Docket: 41 WDA 2014
• Status: Unpublished

Opinion

J-A27029-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

INTERSTATE FIRE PROTECTION : IN THE SUPERIOR COURT OF COMPANY, INC., : PENNSYLVANIA : Appellee : : v. : : REPAL CONSTRUCTION COMPANY, : INC., : : Appellant : No. 41 WDA 2014

Appeal from the Order Entered December 13, 2013, In the Court of Common Pleas of Allegheny County, Civil Division, at No. GD-11-21284.

BEFORE: FORD ELLIOTT, P.J.E., SHOGAN and MUSMANNO, JJ.

MEMORANDUM BY SHOGAN, J.: FILED DECEMBER 15, 2014

Repal Construction Company, Inc. (“Repal” or “contractor”) appeals

from the December 13, 2013 order from the Court of Common Pleas of

Allegheny County, overruling Repal’s preliminary objections. Specific to this

appeal, Repal had alleged that claims in the complaint filed against it by

Interstate Fire Protection Company, Inc. (“Interstate” or “subcontractor”),

were subject to an arbitration agreement. For the reasons that follow, we

affirm.

Interstate is a fire protection subcontractor that performed work on

construction projects for Repal. On October 14, 2011, Interstate filed a

three-count complaint against Repal seeking recovery for work it performed J-A27029-14

on nine different projects governed by nine separate subcontracts. All of the

subcontracts contained alternative dispute resolution provisions. The

dispute resolution provisions in the nine contracts fall basically into two

groups. The relevant clause in the WalMart,1 Panera Bread, and Back Stage

Pass agreements is found at Paragraph 4 of Exhibit A (“Exhibit A”) attached

to the subcontracts and reads:

In case of any disputes between the Subcontractor and Contractor, the Subcontractor agrees that the form of dispute resolution between it and the contractor shall be governed by the terms of the Contract Documents to the same manner of dispute resolution as is provided for between the Owner and Contractor and by any and all decisions or determinations whether by court, arbitrator(s) or architect made with respect thereto. This provision is to be defined as requiring the Subcontractor to be governed by arbitration, mediation or legal or equitable action if the contractor is required to use those means of resolving contract disputes on the project with the Owner. However, notwithstanding anything to the contrary herein, the Contractor may elect that any dispute between it and the Subcontractor shall be governed by action in a court of law or equity. This election shall be made within 60 days after Subcontractor notifies Contractor of its intent to seek dispute resolution and specifically refers to this provision.

The pertinent clauses in the Union Aid Society, Tenant Fit-Out, Bryant

Street Project, Third East Hills, and World Vision agreements include the

1 The WalMart subcontract also included a provision requiring the parties to submit their claims to non-binding mediation as a condition precedent to filing suit. Addendum to the Repal Subcontract for the WalMart Project, Exhibit “C”, ¶ 4. Although Repal referenced Interstate’s failure to comply with this provision in its preliminary objections, the trial court did not address the unique clause included in the WalMart agreement. Repal does not challenge the trial court’s omission in this regard on appeal.

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above-recited provision, also attached as Exhibit A to each of those

subcontracts, and an additional provision included in the body of the

agreements:

§ 6.1.2. Claims not involving the Owner.

Contractor and Subcontractor agree that claims and disputes, between themselves, and/or the Contractor's surety, shall be resolved either by arbitration to be conducted by the Construction Dispute Resolution Group of the Allegheny County Bar Association (“CDRG”) . . . or litigation before the Court of Common Pleas of Allegheny County, Pennsylvania or in the Federal District Court for the Western District of Pennsylvania, without a jury, or before a jury, all as the Contractor or Contractor's surety, if any, should in their sole discretion elect . . . . This shall be acknowledged as Subcontractor's consent to arbitration, notwithstanding that the decision to arbitrate disputes shall be in the sole discretion of Contractor.

The North Allegheny agreement includes the above-recited § 6.1.2.

clause (“Paragraph 6”) concerning claims not involving the owner; however,

Exhibit A attached to the North Allegheny subcontract is an “open shop

performance clause.” The North Allegheny subcontract does not include the

Exhibit A notice provision that is incorporated into the other eight

agreements.

Repal filed preliminary objections to the complaint on December 12,

2011, alleging, inter alia, that the complaint must be dismissed based on

Repal’s reading of the language in the subcontracts that compels the parties

to submit their claims to arbitration, if Repal so elects. On February 20,

2012, pursuant to Allegheny County Court Local Rule 1028(C)(1)(c)(ii),

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Repal filed evidence in connection with its preliminary objections, to wit,

letters dated February 17, 2012, informing Interstate of Repal’s election to

submit seven of the nine disputes to arbitration.2 Repal also attached copies

of contracts between it and the owners of four of the projects where

Interstate performed subcontractor work.

Argument on Repal’s preliminary objections was scheduled for March

12, 2012, but the parties agreed to a continuance so that they could attempt

to reach an amicable resolution. However, there was minimal

communication between the parties and, it was not until twenty months later

on November 1, 2013, that Interstate filed an Answer to Repal’s Preliminary

Objections. Interstate argued that the matter could not be referred to

arbitration because the arbitration entity, CDRG, no longer existed and

because the request for arbitration was untimely.

After oral argument, the trial court overruled Repal’s arbitration-based

preliminary objection, reasoning:

The Arbitration language is cast in the disjunctive and the Arbitration entity does not exist . . . . I do not believe the language of the contracts can permit me to impose some other Arbitration entity upon Plaintiff especially because of the word “or.”

Trial Court Order, 12/13/13, at 2 (emphasis in original).

The trial court then overruled the remaining preliminary objections and

2 Repal did not submit arbitration-election letters in regard to the WalMart and Back Stage Pass disputes.

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ordered Repal to file an answer. Id.

On January 3, 2014, Repal filed an appeal.3 On January 22, 2014, the

trial court issued an opinion, concluding that the invocation of arbitration

was outside the time limitation agreed upon, and further, that even if the

invocation was timely, the entity for arbitration was now defunct.

Appellant raises the following issues for review:4

1. DID THE TRIAL COURT ERR IN FINDING THAT THE PARTIES DID NOT HAVE A VALID AGREEMENT TO ARBITRATE?

2. DID THE TRIAL COURT ABUSE ITS DISCRETION WHEN IT DETERMINED THAT APPELLANT’S INVOCATION OF DISPUTE RESOLUTION WAS OUTSIDE THE TIME LIMITATION IMPOSED AND AGREED UPON BY THE PARTIES, WHERE THE APPELLANT TIMELY NOTIFIED APPELLEE OF ITS ELECTION TO ARBITRATE?

3. DID THE TRIAL COURT ABUSE ITS DISCRETION WHEN IT DETERMINED THAT THE AGREEMENT TO ARBITRATE COULD NOT BE ENFORCED BECAUSE THE ARBITRATION ENTITY NO LONGER EXISTS?

Appellant’s Brief at 3.

When reviewing a trial court’s denial of a motion to compel arbitration,

in the form of a preliminary objection raising an agreement for alternative

dispute resolution, the standard of review is whether the trial court

committed an abuse of discretion and whether the trial court’s findings are

3 The trial court did not enter an order requiring a Statement of Errors Complained of on Appeal pursuant to Pa.R.A.P. 1925(b). 4 An appeal may be taken from an order denying an application to compel arbitration. 42 Pa.C.S. § 7320(a)(1); Shadduck v. Christopher J. Kaclik, Inc., 713 A.2d 635, 636 (Pa. Super. 1998).

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supported by substantial evidence. Pisano v. Extendicare Homes, Inc.,

77 A.3d 651, 654–655, appeal denied, 86 A.3d 233 (2014), cert. denied., 34

S. Ct. 2890 (2014) (quoting Elwyn v. DeLuca, 48 A.3d 457, 461 (Pa.

Super. 2012)). In deciding whether the trial court should have compelled

arbitration, we employ a two-part test: 1) does a valid agreement to

arbitrate exist and 2) is the dispute within the scope of the agreement? Id.

“Arbitration is a matter of contract and, as such, it is for the court to

determine whether an express agreement between the parties to arbitrate

exists.” Midomo Co., Inc. v. Presbyterian Housing Development

Co., 739 A.2d 180, 187 (Pa. Super. 1999) (quoting Smith v. Cumberland

Group, Ltd., 687 A.2d 1167, 1171 (Pa. Super. 1997)). If a valid agreement

exists, the next inquiry is whether a claim is within the scope of an

arbitration provision. This presents a question of law and our review of the

trial court’s conclusion is plenary. Smay v. E.R. Stuebner, Inc., 864 A.2d

1266, 1272–1273 (Pa. Super. 2004). “The scope of arbitration is

determined by the intention of the parties as ascertained in accordance with

the rules governing contracts generally.” Id. (internal quotations omitted).

Preliminarily, Repal’s and Interstate’s respective characterizations of

the trial court’s decision as a pronouncement on the validity of the

arbitration agreements themselves misconstrue the court’s rationale. In

fact, the trial court did not rule specifically on the agreements’ validities;

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rather, it determined first, that Appellant did not timely request arbitration in

accordance with the subcontract provisions and, second, because the

arbitration entity, CDRG, no longer existed, that enforcement of those

provisions was impossible.5

We, in turn, perceive no reason to question the soundness of the

agreements. On their faces, each agreement appears legitimate — they

have been signed by the parties and contain the necessary elements of a

contract. Although the agreements are not identical, the contractor and

subcontractors agreed generally, that in some situations, disputes between

them could be resolved via alternate dispute resolution. Thus, the sole

question presented is whether the disagreements between Repal and

Interstate fell within the scope of the arbitration agreements. While this

inquiry may implicate whether the parties abided by particular provisions or

whether certain paragraphs are capable of performance, the validity of the

agreements is not in question.

Before we can parse the parties’ respective arguments on the scope of

the duties and obligations arising under the subcontracts, we must identify

an inconsistency in the five agreements that include both Exhibit A and

Paragraph 6. Although Exhibit A is far from a model of clarity, the first

sentence provides that, in the event of a dispute, the subcontractor agrees

5 Additionally, neither party challenged the facial validity of the arbitration agreements during litigation of the preliminary objections.

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that the form of dispute resolution between it and the contractor shall mimic

the dispute resolution process articulated in the contracts between the

owners and the contractor.6 The second sentence informs that the provision

is understood as requiring subcontractors to be governed by “arbitration,

mediation or legal or equitable action” if the contractor is required to use

those means of resolving contract disputes on the project with an owner.

Exhibit A to Subcontracts (except North Allegheny). We agree with Repal

that these two sentences describe procedures to be implemented when

conflicts arise between contractors and owners and only tangentially involve

subcontractors.

The third and fourth sentences of Exhibit A offer the best description of

the applicable mechanics for resolving disputes solely between

subcontractors and contractors. These two sentences provide that the

contractor has the right to elect to proceed in court and must provide the

subcontractor notice of its election within sixty days after the subcontractor

advises the contractor of its intent to seek dispute resolution. Thus, if the

subcontractor opts for an alternative dispute resolution forum and

6 Repal included contracts between it and four of the owners in its evidence submitted in support of its preliminary objections, but did not identify or provide record citations to any provisions in these contracts referencing dispute resolution. Our independent record review revealed that only one contractor–owner contract, between Repal and Bryant Street, included a dispute resolution clause. As neither party argues the significance of the contractor-owner contracts, we render no opinion on their relevance to this lawsuit.

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announces its intention to do so, the contractor may elect to proceed in

common pleas court if it provides timely notice of this designation.

However, there is no inverse right for the contractor to elect arbitration if

the subcontractor initiates its action in a court of law or equity. Conversely,

Paragraph 6 instructs that its terms should be understood as a

subcontractor’s consent to arbitration and that the decision to arbitrate is in

the sole discretion of the contractor. Faced with these apparent

irreconcilable clauses, we deem it prudent to dissect the issues as they

pertain to each of the subcontracts or group of subcontracts. As much as

piecemeal adjudication is disfavored, the variances in the subcontracts

compel such a divided discussion.

WalMart, Panera Bread, and Back Stage Pass Projects

Under the terms of the WalMart, Panera Bread, and Back Stage Pass

subcontracts, if Interstate decides to initiate a claim against Repal in a forum

other than a court of law or equity, Repal has the choice to opt out of the

alternative dispute resolution forum and proceed in court. Here, Interstate

filed suit in the Court of Common Pleas of Allegheny County. Exhibit A

dictates that Repal must submit itself to that court’s jurisdiction and cannot

elect to proceed in arbitration. Thus, albeit for a reason other than the trial

court’s decision that the request for arbitration was untimely,7 we conclude

7 We may affirm the trial court’s decision on any ground regardless of the reasons relied upon by the trial court. Toy v. Metropolitan Life

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that the trial court did not abuse its discretion in overruling Repal’s

preliminary objection invoking its election for arbitration of the WalMart,

Panera Bread, and Back Stage Pass disputes.

Union Aid Society, Tenant Fit-Out, Bryant Street Project, Third East Hills, and World Vision Projects

These five subcontracts include the inconsistent provisions concerning

Repal’s option to proceed to arbitration. Exhibit A provides for no such right,

while Paragraph 6 vests Repal with the sole discretion to elect arbitration.

We need not grapple with the provisions’ irreconcilability, however, because

the trial court correctly decided that arbitration is unavailable for disputes

arising under these subcontracts for the independent reason that the

arbitration entity selected, the CDRG, no longer exists.

Repal argues that the fact that the CDRG is defunct should not

preclude arbitration because the general intent to arbitrate controls and the

identification of a particular arbitrator is not important. It also faults

Interstate for delaying almost two years before filing its response to Repal’s

preliminary objections, noting that the CDRG was a viable arbitration entity

when it filed its preliminary objections.

Insurance Co., 863 A.2d 1, 14 (Pa. Super. 2004) (citing Boyer v. Walker, 714 A.2d 458, 463 n. 10 (Pa. Super. 1998).

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Stewart v. GGNSC–Canonsburg, L.P., 9 A.3d 215 (Pa. Super.

2010), is the prevailing case on whether the unavailability of a particular

arbitrator renders the agreement to arbitrate unenforceable.8 In Stewart,

an action was brought by a resident of the defendant–nursing home claiming

that the defendants were negligent in the care provided to the plaintiff. The

defendants filed preliminary objections seeking to compel enforcement of an

arbitration agreement entered into by the parties. The arbitration

agreement provided that in the event of a dispute, the parties were to

proceed to arbitration in accordance with the National Arbitration Forum

(“NAF”) Code, and the Code was to be administered only by the NAF. The

problem in the case was that the NAF was no longer accepting arbitration

cases. The trial court characterized the arbitration forum selection clause

designating the NAF and its procedures as an essential term of the

agreement. In light of the failure to perform this essential element, the trial

court held that the arbitration agreement was unenforceable.

8 On June 24, 2014, the Pennsylvania Supreme Court granted the Petition for Allowance of Appeal in Wert v. ManorCare of Carlisle PA, LLC, 95 A.3d 268, 269 (Pa. 2014). One of the issues before the Supreme Court is whether this Court’s decision in Stewart, holding that the unavailability of a particularly designated arbitrator voided an arbitration agreement, was incorrectly decided and should be reversed. Stewart, however, remains controlling law. See Marks v. Nationwide Insurance Company, 762 A.2d 1098, 1101 (Pa. Super. 2000) (as long as decision has not been overturned by Pennsylvania Supreme Court, decision by Superior Court remains binding in Superior Court).

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A panel of this Court affirmed the trial court’s ruling. In doing so, the

Court held that “an arbitration agreement will not fail because of the

unavailability of an arbitrator unless the parties’ choice of forum is an

‘integral part’ of the agreement to arbitrate, rather than ‘an ancillary

logistical concern.’” 9 A.3d at 219 (quoting Reddam v. KPMG L.L.P., 457

F.3d 1054, 1061 (9th Cir. 2006)). “At a minimum, for the selection of the

arbitrator to be integral, “the arbitration clause must include an express

statement designating a specific arbitrator.” Id. (quotations omitted). The

Stewart court concluded that the forum selection clause in the arbitration

agreement at issue, specifying that the laws and procedures of the NAF shall

govern the arbitration, was an essential portion of the agreement. The court

thus declared that the agreement was unenforceable because the NAF was

no longer available to adjudicate the matter, and, to conclude otherwise,

would thwart the clear intent of the parties. Id. at 221–222.

Likewise, in this matter, the trial court determined that the specific

contractual language designating the CDRG to arbitrate this dispute required

the parties to proceed before that entity. We agree. Accordingly, the trial

court did not abuse its discretion when it determined that the unavailability

of the CDRG rendered the Union Aid Society, Tenant Fit-Out, Bryant Street

Project, Third East Hills, and World Vision arbitration agreements

unenforceable.

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North Allegheny Project

The North Allegheny subcontract is governed solely by the Paragraph 6

arbitration clause. For the reasons explained above, the unavailability of the

CDRG to arbitrate this dispute also renders this arbitration agreement

Finally, in response to Repal’s grievance that Interstate’s delay in filing

its answer to Repal’s preliminary objections occasioned the predicament

posed by the CDRG’s demise, the record demonstrates that neither party

facilitated the progression of this lawsuit.

For the above–stated reasons, the trial court did not err in overruling

Repal’s preliminary objection to compel arbitration, and we affirm the trial

court’s order.

Order affirmed. Case remanded. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 12/15/2014

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