M2J2S, LLC v. United Telephone
M2J2S, LLC v. United Telephone No. 1517 MDA 2016
| Pa. Super. Ct. | Sep 5, 2017Background
- CenturyLink contracted ServiceMaster to perform emergency mold and roof-leak remediation at a CenturyLink-leased property; they signed a statement of authorization containing an arbitration clause that excepted "non-payment of invoices for ServiceMaster's work."
- During remediation, a dispute arose over alleged asbestos contamination; CenturyLink inspected, reported contamination to DEP, and asserted offset claims totaling about $164,000.
- ServiceMaster filed suit in state court alleging breach of contract, fraud, deceptive reporting to DEP, and related claims; CenturyLink filed preliminary objections asserting the arbitration clause required arbitration of the dispute.
- The trial court overruled CenturyLink’s preliminary objection based on lack of subject-matter jurisdiction, concluding the arbitration clause excluded disputes involving non-payment of invoices and thus ServiceMaster’s complaint could proceed in court.
- CenturyLink appealed, arguing the complaint’s substance arises from ServiceMaster’s alleged breach and therefore falls within the arbitration clause.
- The Superior Court held the excepting language in the arbitration clause ambiguous and remanded for factual development (including possible parol evidence) to determine the clause’s intended scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the dispute is subject to arbitration under the contract's arbitration clause | ServiceMaster: its suit includes non-payment claims exempted from arbitration; thus the court has jurisdiction | CenturyLink: the dispute arises from ServiceMaster's alleged breach and falls within the arbitration clause’s scope | The arbitration-exception phrase is ambiguous; trial court erred in resolving it as a matter of law; remand for factfinding/parol evidence |
| Proper interpretation of the clause "except for non-payment of invoices for ServiceMaster’s work" — narrow vs. broad reading | ServiceMaster: reads exception broadly to exclude any issue involving non-payment from arbitration | CenturyLink: reads exception narrowly — only pure non-payment claims are excluded; other disputes (including breaches causing offsets) must be arbitrated | Court: clause susceptible to two reasonable constructions; ambiguity exists and requires factual resolution by trial court/factfinder |
| Whether the trial court could resolve the ambiguous clause as a matter of law on preliminary objections | ServiceMaster: trial court correctly concluded clause excluded the claims from arbitration | CenturyLink: trial court should have compelled arbitration because claims arise from breach of contract | Held: trial court abused its discretion by construing the ambiguous clause as a matter of law; must allow parol evidence/factfinding |
| Standard and scope for compelling arbitration on preliminary objections | ServiceMaster: arbitration clause was clear enough to deny arbitration on these pleadings | CenturyLink: scope-of-arbitration is a question of law; plaintiff's pleading cannot avoid arbitration if substance falls within clause | Held: where clause is ambiguous, courts must not interpret it as a matter of law; remand for resolution of the ambiguity and scope determination |
Key Cases Cited
- Callan v. Oxford Land Dev., Inc., 858 A.2d 1229 (Pa. Super. 2004) (standards for reviewing orders denying arbitration and construction of arbitration clauses)
- Pittsburgh Logistics Sys., Inc. v. Professional Transp. & Logistics, Inc., 803 A.2d 776 (Pa. Super. 2002) (two-part test for compelling arbitration: existence and scope)
- TrizecHahn Gateway LLC v. Titus, 976 A.2d 474 (Pa. 2009) (ambiguous writings are interpreted by the factfinder)
- Walton v. Philadelphia Nat’l Bank, 545 A.2d 1383 (Pa. Super. 1988) (parol evidence admissible to ascertain intent when contract language is ambiguous)
- Miller v. Poole, 45 A.3d 1143 (Pa. Super. 2012) (parol evidence may explain patent or latent ambiguity)
- Windows v. Erie Ins. Exch., 161 A.3d 953 (Pa. Super. 2017) (courts decide whether contract terms are clear or ambiguous; ambiguities go to the factfinder)
- Fellerman v. PECO Energy Co., 159 A.3d 22 (Pa. Super. 2017) (analyzing whether tort/contract claims fall within arbitration clause scope)