J-A23010-14
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P 65.37
RAY DAMI AND RAD MANAGEMENT : IN THE SUPERIOR COURT OF
ASSOCIATES, INC., : PENNSYLVANIA
:
Appellees :
:
v. :
:
LANE M. TURTURICE, TERRY L. FAUST :
AND JEFFREY D. BULL, :
:
Appellants : No. 602 WDA 2013
Appeal from the Order entered March 19, 2013,
Court of Common Pleas, Washington County,
Civil Division at No. 2012-5004
BEFORE: DONOHUE, ALLEN and MUSMANNO, JJ.
MEMORANDUM BY DONOHUE, J.: FILED SEPTEMBER 18, 2014
Appellants, Lane M. Turturice (“Turturice”), Terry L. Faust (“Faust”),
and Jeffrey D. Bull (“Bull”) (collectively, the “Appellants”), appeal from the
trial court’s order dated March 19, 2013, denying their Preliminary
Objections to the Amended Complaint of Appellees Ray Dami (“Dami”) and
RAD Management Associates, Inc. (“RAD”) (collectively, “Appellees”). For
the reasons that follow, we reverse the trial court’s order and remand with
instructions.
RAD, a company owned and operated by Dami, had a contract with the
Washington East Washington Joint Sewer Authority (“WEWJA”) to provide
professional management services to operate the municipal sewer authority
(hereinafter, the “Agreement”). In March 2011, WEWJA terminated the
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Agreement. At the time of termination, Faust and Bull were members of
WEWJA’s Board of Directors and Turturice was the Board’s Solicitor.
Through the arbitration clause in the Agreement, RAD contested the
termination. A three-member arbitration panel heard the claims of RAD and
the cross claims of WEWJA, and on March 28, 2012 entered an arbitration
award in favor of WEWJA. The trial court subsequently dismissed a petition
filed by RAD to vacate the arbitration award.
Dami and RAD then filed the instant lawsuit, in which they set forth
claims of defamation and false light invasion of privacy against Turturice and
claims of conspiracy and tortious interference with contractual relationships
against all of the Appellants. The Appellants filed Preliminary Objections in
which they, inter alia, sought dismissal of the Complaint on the grounds that
the trial court lacked subject matter jurisdiction and that the matter should
instead be referred to arbitration pursuant to the arbitration provision in the
Agreement. In response, Dami and RAD filed an Amended Complaint,
adding additional allegations to establish that in connection with the
termination of the Agreement, the Appellants acted outside the scope of
their official capacities as Solicitor and Board Members – including that the
three conspired to have Turturice present to the WEWJA Board a false and
misleading investigative report regarding RAD to serve as the basis for the
Board’s termination of the Agreement.
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The Appellants filed Preliminary Objections to the Amended Complaint,
again asserting that the disputes must be referred to arbitration pursuant to
the terms of the Agreement. The Appellants denied that Dami and RAD
acted outside of their official capacities, attaching to the Preliminary
Objections as exhibits a substantial quantum of supporting evidence,
including deposition transcripts, answers to interrogatories, Board minutes,
and other documentary evidence. Dami and RAD then filed Preliminary
Objections to Appellants’ Preliminary Objections, and a Brief in Support of
Preliminary Objections and in Opposition to [Appellants’] Preliminary
Objections. Dami and RAD attached to their brief evidence in support of the
allegations in the Amended Complaint, including deposition transcripts and
exhibits. Finally, in a Brief in Opposition to [Appellees’] Preliminary
Objections to Preliminary Objections, the Appellants attached additional
exhibits, including minutes of meetings of the Washington City Council.
After oral argument, by order dated March 19, 2013, the trial court
overruled the Appellants’ Preliminary Objections as “premature.” In its
order, the trial court concluded that “although [Appellants] have raised
numerous potentially dispositive objections, these matters are most properly
raised in a Motion for Summary Judgment after the parties have thoroughly
ventilated [Appellees’] allegations in Discovery.”1 Trial Court Order,
1
In their appellate brief, the Appellees now contend that the trial court
decided the disputed issues of fact in their favor based “on a sufficient
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3/19/2013, at ¶ 2. In its subsequent written opinion pursuant to Rule
1925(a) of the Pennsylvania Rules of Appellate Practice, the trial court held
that while it was “skeptical of the bald assertions of the [Appellees] that the
[Appellants] were acting outside their authority,” its hands were tied
because “[w]hen deciding preliminary objections, the trial court must
consider as true all [well] pleaded facts set forth in the complaint and all
reasonable inferences that can be drawn therefrom.” Trial Court Opinion,
2/10/2014, at 3. The trial court indicated that it had considered the exhibits
attached to the Appellants’ Preliminary Objections, but the Appellees
“asserted that they needed discovery involving many of the issues.” Id.
at 6. As a result, the trial court “found the allegations were sufficient to
proceed and declined to dismiss the claims at the preliminary objections
stage.” Id. at 3.
This timely appeal followed, in which the Appellants raise four issues
for our consideration and determination:
1. Whether the trial court erred in finding that
Appellants’ preliminary objections in the nature of a
petition to compel arbitration and lack of subject
matter jurisdiction were premature and deferring to
a motion for summary judgment, where the
record of evidence.” Appellees’ Brief at 13 (“The Trial Court based its finding
that Defendants were acting outside the scope of their authority as agents of
WEWJA with regard to their actions at issue in this suit, on a sufficient
record of evidence, which included Defendants’ own sworn testimony.”). We
find no basis whatsoever for such an assertion, either in the trial court’s
March 19, 2013 order or its February 10, 2014 written opinion in support of
its order. The trial court repeatedly declined to decide these issues of fact.
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arbitrability of a dispute is required to be determined
at the outset of litigation with the trial court
developing the appropriate factual record on the
issue, if necessary.
2. Whether the trial court erred in failing to find that a
valid agreement to arbitrate existed between the
parties, where all parties to this lawsuit are either
signatories to the [Agreement] or constitute agents
and representatives of the signatories, and where
Appellees failed to either plead or prove that
Appellants were acting ‘outside’ their capacities as
agents and representatives of the signatories.
3. Whether the trial court erred in failing to compel
arbitration on an alternative basis, i.e., whether the
doctrine of equitable estoppel precludes Appellees
from resisting arbitration where there is an obvious
and close nexus between the non-signatories and the
contract, as well as an obvious and close nexus
between the non-signatories and the contracting
parties.
4. Whether arbitration should be compelled where
Appellees’ claims fall within the scope of a valid and
enforceable arbitration clause which broadly requires
arbitration as to ‘any matter in connection’ with the
subject [Agreement].
Appellants’ Brief at 4-5.
An agreement containing an arbitration clause as a form of alternative
dispute resolution is properly raised in preliminary objections, Pa.R.C.P.
1028(a)(6), and the denial of preliminary objections seeking to compel
arbitration is appealable as an interlocutory appeal as of right. 42 Pa.C.S.A.
§ 7320(a)(1); Pa.R.A.P. 311(a)(9); Gaffer Ins. Co., Ltd. v. Discover
Reinsurance Co., 936 A.2d 1109, 1110 (Pa. Super. 2007). “Our review of
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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.” Midomo Co., Inc. v. Presbyterian Housing Development Co.,
739 A.2d 180, 186 (Pa. Super. 1999); see also Gaffer, 936 A.2d at 1112.
When deciding whether a 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. Smay v. E.R.
Stuebner, Inc., 864 A.2d 1266, 1270 (Pa. Super. 2004); Callan v. Oxford
Land Development, Inc., 858 A.2d 1229, 1233 (Pa. Super. 2004). If a
valid arbitration agreement exists between the parties and the plaintiff's
claim is within the scope of the agreement, the controversy must be
submitted to arbitration. Highmark Inc. v. Hospital Service Ass'n. of
Northeastern Pennsylvania, 785 A.2d 93, 98 (Pa. Super. 2001), appeal
denied, 797 A.2d 914 (Pa. 2002). Public policy strongly favors the
enforcement of arbitration provisions to settle disputes quickly, fairly, and
economically. Smay, 864 A.2d at 1272.
For their first issue on appeal, Appellants contend that the trial court
erred in declining to decide the issue of arbitrability at the preliminary
objections stage of the proceedings. We agree. Rule 1028(c)(2) of the
Pennsylvania Rules of Civil Procedure states as follows:
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(c)(2) The court shall determine promptly all
preliminary objections. If an issue of fact is raised,
the court shall consider evidence by depositions or
otherwise.
Pa.R.C.P. 1028(c)(2). Where preliminary objections raise one or more
issues of contested fact, this Court and our Supreme Court have instructed
that “the trial court must ‘resolve the dispute by receiving evidence thereon
through interrogatories, depositions or an evidentiary hearing.’”2 Slota v.
Moorings, Ltd., 494 A.2d 1, 2-3 (Pa. Super. 1985) (citing Holt Hauling
and Warehousing Systems, Inc. v. Aronow Roofing Co.,
454 A.2d 1131, 1133 (Pa. Super. 1983) and Luitweiler v. Northchester
Corp., 319 A.2d 899, 902 (Pa. 1974)).
In Schmitt v. Seaspray-Sharkline, Inc., 531 A.2d 801 (Pa. Super.
1987), this Court amplified on the burdens of production and proof in this
circumstance:
Appellee properly contested jurisdiction by filing
preliminary objections. The moving party has the
2
Local Rule L-1028(c) of the Washington County Local Rules of Civil
Procedure provides in pertinent part:
Where Preliminary Objections contain grounds
raising issues of fact, said objections shall be
endorsed with a Notice to Plead and the Court will
schedule deposition of said objections with due
consideration for the time required by the parties to
obtain evidence required for consideration of said
objection. All evidence that the parties wish the
Court to consider shall be filed with the party’s Brief.
Washington County Rules of Civil Procedure L-1029(c).
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burden of supporting its objections to the court's
jurisdiction. Once the plaintiff has produced some
evidence to support jurisdiction, the defendant must
come forward with some evidence of his own to
dispel or rebut the plaintiff's evidence. The moving
party may not sit back and, by the bare allegations
as set forth in the preliminary objections, place the
burden upon the plaintiff to negate those allegations.
It is only when the moving party properly raises the
jurisdictional issue that the burden of proving
jurisdiction is upon the party asserting it. If an issue
of fact is raised, the court shall take evidence by
deposition or otherwise. The court may not reach a
determination based upon its view of the
controverted facts, but must resolve the dispute by
receiving evidence thereon through interrogatories,
depositions, or an evidentiary hearing.
Id. at 531-32 (citations omitted).
The Preliminary Objections filed by the Appellants clearly raise
dispositive issues of fact. The Agreement between WEWJA and RAD
provides in relevant part:
In the event of any dispute between [WEWJA] and
RAD with respect to any matter in connection with
this Agreement, such dispute shall be settled by
arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration
Association.
Preliminary Objections to Amended Complaint, 11/21/2012, at Exhibit 1.
The Appellants contend that this arbitration provision requires that the
claims in the Appellees’ Amended Complaint be submitted to arbitration
because all three Appellants, as the Solicitor and Board Members, are agents
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and representatives of WEWJA.3 The Appellees disagree, contending that
the allegations in the Amended Complaint establish that the three Appellants
were acting outside the scope of their capacities as agents and
representatives of WEWJA, and therefore the Agreement has no application
here. The Appellants counter, arguing that the evidence attached to their
Preliminary Objections establishes that they were acting within the scope of
their representative capacities at all times in connection with WEWJA’s
termination of the Agreement.
Pursuant to Rule 1028(c)(2), it was incumbent on the trial court to
decide the Appellants’ Preliminary Objections “promptly,” and its decision to
defer a determination regarding the arbitrability of the Appellees’ claims until
the summary judgment stage of the proceedings was error. Accordingly, we
reverse the trial court’s March 19, 2013 and remand the case with
3
As the trial court correctly recognized, so long as individuals act within the
scope of their representative capacities, a valid agreement to arbitrate is not
rendered ineffective merely because the claims at issue are asserted against
individuals rather than the corporate signatory of the agreement. Trial Court
Opinion, 2/10/2014, at 5-6. In general, only the parties to an arbitration
agreement are subject to arbitration. Cumberland-Perry Area
Vocational-Technical School v. Bogar & Bink, 396 A.2d 433, 435
(Pa. Super. 1978). As our Supreme Court recently reaffirmed in Tayar v.
Camelback Ski Corp., Inc., 47 A.2d 1190, 1196 (Pa. 2012), however,
corporate entities must act through their agents and representatives, and
thus contractual provisions referring to the corporate entity are assumed to
also refer to the entity’s agents and representatives (even if not specifically
mentioned). Accordingly, if the Appellants were acting within the scope of
their representative capacities on behalf of WEWJA, the reference in the
arbitration provision of the Agreement to WEWJA in the above-cited
arbitration provision applies to both to WEWJA and the Appellants.
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instructions that the trial court decide all issues of fact and issue a ruling
either granting or overruling said Preliminary Objections forthwith.4 We note
that the parties have already submitted substantial evidence to the trial
court on the disputed issues of fact, but it is in the trial court’s discretion to
determine whether to permit the parties to engage in additional discovery
and/or whether to conduct an evidentiary hearing prior to rendering its
ruling.
The trial court’s order dated March 19, 2013 is reversed. The case is
remanded to the trial court to make a determination on the arbitrability of
this dispute. This Court’s jurisdiction is relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/18/2014
4
Based upon our disposition of the Appellants’ first issue on appeal, it is
unnecessary to address the remaining three issues.
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