*1 INC., successor HIGHMARK
to Medical Service Pennsylvania
Pennsylvania Blue d/b/a
Shield, and Blue Cross
Association, Appellants, ASSOCIATION
HOSPITAL SERVICE
OF PENNSYLVA- NORTHEASTERN Blue Cross of Northeastern
NIA d/b/a
Pennsylvania Northeast- and HMO of Pennsylvania
ern d/b/a Cases). (Four
Health, Appellees
Appeal Cross Association. Pennsylvania.
Superior Court May
Argued 2001. Sept.
Filed Denied
Reargument Nov. *2 O’Connor, Philadelphia, for J.
Patrick of Northeast- Service Association Hospital Pennsylvania, appellee. ern *3 Friedman, Pittsburgh, Joseph mark, Inc. CAVANAUGH, STEVENS,
Before: TAMILIA, JJ. CAVANAUGH, J. This involves Blue Cross case (Association) and one of
Shield Association a second attempting compel its licensees a between licensee arbitrate an to a of licensees and the between such dis- requiring that all second licensee arbitration. We putes be submitted to agreement contained valid hold that the dis- provision, present scope of that pute falls within the sion, waiver and other defenses the arbitra- properly arbitration are before tor rather than this court.
¶2 ap- Highmark Inc. and Association and Decem- peal November 10,1999, denying petition ber orders for re- and the motions compel arbitration We reverse. consideration. through the Highmark was formed of Veritus
December consolidation Inc., of operated which as Blue Cross Pennsylvania, and Medical Ser- Western op- which Pennsylvania, vice Association (Blue Pennsylvania Blue erated as Shield Shield). Historically, supplied Veritus coverage while Blue Shield hospitalization doctors’ services. provided coverage for Association, member Highmark is owns and licenses the Cross which The license names. require, agreements with Association exception, limited to arbitration. submitted licensees be Amend, Blue Cross IL, license to use the Chicago, Highmark’s M. for Blue James Pennsyl- to 29 western name is restricted Blue Shield Association. Cross vania counties. It has the if exclusive could ameliorated ac- use the Blue Shield throughout name quired equity Priority. Pennsylvania. In BCNEPA and Blue good to negotiate in faith for acquisi-
¶ Hospital Service Association of stock by Blue Shield in First Priori- Pennsylvania, oper- Northeastern which ty. February In reject- ates as Blue Cross of Penn- Northeastern ed Blue offer to purchase Shield’s a 50% (BCNEPA), sylvania licensed Associ- interest. ation to use the Blue Cross name Pennsylvania northeastern counties. 7 In May of after the formation *4 traditionally BCNEPA provided hospital- Highmark of through the of consolidation ization coverage. HMO of Northeastern Veritus, Highmark Shield sought Pennsylvania, operates which as Pri- First pursuant arbitration li- to Association’s (First ority Health Priority), wholly is a High- cense with BCNEPA. owned of subsidiary BCNEPA and is a mark alleged promotion that BCNEPA’s party to an affiliate license Priority’s coverage First HMO violated
Association which it entitles to the same 1, 1976, January joint operating agree- service area as BCNEPA. Pursuant to a ment. BCNEPA that Associa- responded 1, 1976, January joint operating agreement tion’s not require license did BCNEPA, between Blue Shield and arbitration of the matter. BCNEPA plans markets health care of- ¶ 3,1997, a Highmark 8 On October filed by Highmark fered and BCNEPA as a complaint petition to compel and a arbitra- single package in BCNEPA’s service area. County against tion in BCNEPA Dauphin ¶ mid-1980s, 5 In the Blue Shield and day, Priority. and First the same On BCNEPA establishing discussed jointly filed an Priority BCNEPA and First ac- owned Health Organization Maintenance County tion in a declara- seeking Luzerne (HMO) in BCNEPA’s service Since area. they may market and sell First they were unable to come to an agreement Priority’s products under the Janu- HMO as to percentages ownership, 1, 1976, ary agreement. joint operating began BCNEPA founded and operating Dauphin The cases were consolidated Priority First wholly as a owned County. as a Association intervened subsidiary. According Highmark, to the license and asserted that promote did actively BCNEPA subject was to arbitration. Priority’s HMO until about 1992. By petition lower court denied the provided allegedly BCNEPA incentives to compel arbitration on November 1999. agents sales to sell First On December denied coverage instead traditional BCNE- mark and motions for recon- Association’s coverage. PA/Blue jurisdiction our appeal, sideration. On ¶ 6 In December petition over to compel the denial of the sent a stating letter its con- arbitration arises from Pa.C.S.A. cern that promotion BCNEPA’s of HMO 7320(a)(1). § coverage in which Blue Shield had no in- ¶ Highmark following raises the issues terest to the detriment of traditional cov- on appeal: erage may duty be breach of BCNEPA’s agent its January Appellant as under the 1. Is joint operating agreement. subject Highmark Appellee BCNEPA and Inc. and recognized mandatory that the situation to their issue, must de- a threshold 12 As Agreements
License
with the
applies
what law
the determina-
termine
Cross and Blue Shield Association?
the chancellor should have
tion of whether
Highmark
Did
Inc.
Appellant
be-
arbitration of
compelled
mandatory
waive its
invoke
While
Highmark and BCNEPA.
tween
applicable
of the
law,
applied Pennsylvania
the chancellor
Agreements
License
with the Blue
or that
appellants argue that federal law
Cross and Blue Shield Association?
law,
law
per the choice of
Illinois
as
Did
lower court exceed its au-
agreement, ap-
sion in BCNEPA’s license
law in
thority and
errors of
commit[]
ply-
upon
reaching factual conclusions based
Pennsylvania,
“In
choice
issuing
incomplete
record and
a determination of
analysis
law
first entails
10,1999?
Order of December
competing
states
whether
laws
addition,
10 In
Association raises a
not,
analysis
If
actually differ.
no further
overlapping
number of
issues:
necessary.” Keystone
Surveys,
Aerial
*5
Ass’n,
Ins.
Prop.
Inc.
Pa.
& Cas.
Guar.
v.
court erred in
4. Whether
lower
¶32,
139,
A.2d
PA
777
84
Super
2001
finding
that
Wheeling Pittsburgh
v.
(quoting Ratti
mark and
is not
BCNEPA/First
(Pa.Su
695,
Corp.,
A.2d
702
Steel
758
scope
within the
denied,
10367,
2001 WL
per.2000), appeal
agreements
sions in the license
to which
(Pa.
2001)).
4,
Pa.
41
2001
Lexis
Jan.
parties
are
they
thereby denying
and
we
not find
argue
do not
and
do
parties
peti-
dismissing
complaint
and
the choice of law affects the outcome
that
compel
arbitration?
Federal,
Pennsylvania,
this case.
5. Whether the lower court erred in
arbitration,
law all favor
Shears
Illinois
right
finding that the association has no
McMahon,
Express Inc. v.
on/American
to compel
or need
arbitration
226,
2332,
220,
107 S.Ct.
96
482 U.S.
provisions
to the arbitration
contained in
(1987);
v.
185
Smith Cumberland
L.Ed.2d
license agreements?
Ltd.,
276, 687 A.2d
Group,
Pa.Super.
455
6. Whether
lower court lacked
(1997);
1167,
v. Ill.
1171
Zimmerman
jurisdiction to enter the order dated De-
Co.,
360,
Ill.App.3d
251
Farmers Ins.
317
10,1999
it attempts
cember
insofar as
(2000),
57,
990,
N.E.2d
994-95
Ill.Dec.
739
dated
prior
amend
order
November
finding
waiver
disfavor
12,1999?
arbitration,
Boyd,
F.Supp.
v.
949
Klein
(E.D.Pa.1996);
v. Fox
286,
Goral
289
11 Our standard
review for
Inc.,
316, 683 A.2d
453
Ridge,
sitting
equity
an
from a court
is
appeal
(1996);
Laya
931,
Schroeder Murchie
933
findings of fact
as follows: “A chancellor’s
LLC, 319 Ill.
Lofts,
v. 1000 W.
Assocs.
will
absent an abuse of
not
disturbed
846,
1089,
746 N.E.2d
253 Ill.Dec.
App.3d
discretion, a
disbelief of the evi
capricious
(2001).
laws do
294,
Since the various
300
dence,
evidentiary
on
support
or a lack of
to the
ways
that are material
not differ
A chancellor’s
findings.
the record for the
case,
law.
apply Pennsylvania
present
subject
stricter
of law are
conclusions
¶32,
777
PA
Keystone,
Super
2001
Markvan,
Pa.
scrutiny.” Lilly v.
A.2d 84.
(2000)
(quoting
763 A.2d
Masloff
argue
that
Appellants
531 Pa.
Allegheny County,
Auth.
v. Port
(1992)).
1186, 1188
agreed
A.2d
with
signed
Association’s licensees when it
surance
in-
clause
its license
not susceptible
volved is
an interpre-
the chancellor erred in finding that
tation that covers the asserted dispute.
the instant
was not within the
Midomo,
(quoting
Association, Arbitration, not between BCNEPA Compel of Motion Support third Highmark, Highmark is intended Agreement be- Operating Exhibit Joint beneficiary agreement. of the See party and Blue Pennsylvania tween Lindsay, Gregg v. Pennsylvania at Cross Northeastern one is a (stating 1976).1 (Jan. 1, unable on The CEOs were recogni beneficiary when the party third own, however, the situ- to ameliorate beneficiary’s right “effectuate[s] tion of the Still, between ation. “the parties” cir intention of work to Blue Shield cannot BCNEPA and promisee in cumstances indicate obligations, includ- undermine BCNEPA’s give beneficiary the benefit tend[ed] to its ing duty promised performance”). High- question, there- agreement. The license therefore, may, arbitra mark enforce the fore, to be whether the continues agreement. See Miller v. Allstate is BCNEPA and Blue Shield (Pa.Su 763 A.2d Ins. 405 n. within the .2000) (stating that “a third bene per agreement. license sion of BCNEPA’s rights and limitations in a contract ficiary’s at 1171. are same as con original those of also found that chancellor Moreover, tracting parties”). ap- license did BCNEPA’s dispute. itself intervened While required it only because ply to this Association takes stance on the under disputes arising from the arbitration of merits, to assert lying seeks agree- agreement itself. While the license go should Since “disputes noncompli- as to ment references agreement concerning arbi there is valid ance, disputes,” the chancel- applicable parties tration this looking at lor that “this found *7 case, only question remaining the is wheth meaning noncompliance ‘noncompliance’, present dispute er the is within the Agreements. with the of the License terms provision. 687 all simi- disputes’, The ‘and phrase, 1171. in License refers to what the larly ¶ 19 The chancellor reasoned that be- Opinion, Agreements.” Trial Count the out of cause arose BCNEPA’s 6/23/00, However, at the 1, 1976, January violation of the alleged limiting language. contains such joint operating agreement, the res- ¶ Likewise, Association’s arbi agreement rather provisions'of olution that rules as follows: tration state than BCNEPA’s license with to and desire [Association] The Plans joint operating applied. Mandatory Dis- and utilize Mediation question “[a]ny states (“MMDR”) to avoid ex- pute Resolution may which from the arise and/or Support Supplemented Brief in regulations apply mark’s rules and Association's Arbitration, Li Compel Exhibit to ing are in Motion to arbitration which referenced and As agree agreement between BCNEPA provision cense of the license 1/1/91, Mediation and Exhibit sociation of state that the CEO of com ment likewise (MMDR) Mandatory Dispute Rules Resolution plaining party attempt good in faith to must High- at 1. before arbitration. resolve pensive time-consuming and in litigation agreement ap- may occur in otherwise the federal plies generally all disputes, including to judicial and systems.... state Except as controversy. the instant provided otherwise the License Plans,
Agreements, the however, Controlled argue, Appellees Affiliates agree and to [Association] sub- they be compelled should not to arbi mit disputes MMDR pursuant since, according trate to the finding of the litigation. these Rules and in lieu of chancellor, Highmark waived its arbitra rights delay seeking due to Highmark’s Supplemental Brief in Support Arbitration, of Motion to Compel Exhibit License between BCNEPA right [T]he to enforce an arbitration 1/1/91, and Association of Exhibit Medi- clause can A be waived. waiver of the Dispute ation Mandatory Resolution right proceed may (MMDR) Rules at 1. The rules stated, expressly or it may be inferred quoted above as well section as elsewhere from “a party’s undisputed acts or lan refer to the disputes arbitration of all with- guage purpose so inconsistent a any Moreover, limiting language. out provisions stand on the contract as rules express policy the collective of Asso- leave no for a opportunity reasonable ciation and its costly licensees avoid contrary.” inference to the J. [Samuel litigation. Contracting Marranca Gen. Co. v. Am Assocs., Cherry erimar Hill 416 Pa.Su policy including Association’s ar- (1992) per. provisions agree- bitration in its license ]. Waiv cost, ments is a inferred[,] clear. It desires low low er lightly “should not be profile, resolving uniform means for gained unless has him one’s conduct independent its numerous undue or advantage preju resulted licensees. Litigation raises the cost and dice to another he should not be held price may health insurance and re- right.” relinquished [Kwalick in negative publicity. sult These factors Bosacco, affect Association licensees as a ]. since they repu-
whole share name and a Goral, (citations omitted). tation. Association has made clear that they position take no as to the ultimate can 25 While waive the merits of the underlying dispute. Howev- arbitration, question “the *8 er, private arbitration in a forum is a timeliness of a for ‘is demand arbitration means to affordability priva- maintain interpretation not of of the cy as well as a more achieve uniform re- not or one of the existence scope sult. provision; arbitration it is thus outside the bounds of our and its review resolution ¶23 Because the chancellor’s strained ” must be left to arbitration.’ Lincoln eonclusory reading of “and all other Sys. Higher Univ. Commonwealth record, disputes” supported by is not the of of Educ. Chapter v. Lincoln Univ. Am. Lilly, because A.2d at we are to of Ass’n Univ. 467 Pa. Professors, agreements, favor arbitration A.2d (quoting 582 n. 11 Muh at A.2d and because our review is Liddle, 1185; lenberg Township Dist. Auth. v. plenary, Mido Sch. Pa. mo, we find that the Fortunato Constr. 460 Pa. (1975)).2 Blue Shield an 184, 187 negotiated giving over A.2d ties to Priority in First order equity ¶ 26 While we hold that the issue negoti- after Promptly achieve solution. arbitrator, is for the of timeliness down, sought Highmark arbi- ations broke Highmark that would not found therefore, find, that would tration. We if right waived its to arbitration even we right to arbi- Highmark did not waive its The evaluated that issue on the merits. pro- the over BCNEPA’s trate to chancellor noted that Blue Shield failed it sought when Priority motion of First object Priority of First to the formation after efforts promptly arbitration Highmark, the mid-1980s and that succes resolving at the failed. aimed situation Shield, sought to only sor Blue arbitration years began losing after Blue Shield busi ¶29 argue that also Appellees Priority. The ness First chancellor they compelled should not be delay preju found that the dispute. no In there was arbitrable since diced since it has now invested deed, that there was the chancellor found Priority. significant resources First involving the no arbitrable owner Therefore, that the chancellor determined Priority. of First Or ship operation Highmark waived its arbitration. defense, der, 12/10/99, 2. Appellees’ at ¶ 27 not for- Highmark does contest the however, existence, the not involve does mation First In- Priority, however. scope or the arbitration interpretation, stead, it that claims BCNEPA violated Instead, assert agreement. appellees joint duty agent operating as its under Highmark is no since has there agreement when it First began promoting the under on the merits of basis relief Priority’s HMO the detriment of Despite the chancellor’s lying claims. coverage traditional it offered. It is of must be finding, this defense therefore, little consequence, Univ., Lincoln left to arbitrator. object Shield failed to to the formation at 582 n. 11. Likewise, Priority. First it is unclear what in First way BCNEPA’s investment final defense to ar Appellees Priority prejudiced by resolving, would be arose before bitration is that arbitration, pro- whether BCNEPA’s required license joint motion of First violated their on Appellees’ predicated defense operating agreement. cre dispute involves the notion that Priori operation and initial of First ation began state HMO, provi ty’s predating opposition to BCNEPA’s incentive struc- agreement, rather than of the license sion allegedly began ture after BCNEPA promoted HMO been way has give special to entice customers incentives defense appellees’ since that time. Since Priority’s subscribe HMO. existence, interpreta does involve correctly chancellor found that Blue Shield tion, or at complaint in did not file a underlying However, rather the nature of and but time. *9 defense, too, belongs to trying dispute, this actively engaged
BCNEPA were in Id. court. Indeed, than this par- arbitrator rather to resolve situation. Amerimar, (stating opposition decisions of our to the But stands in see above, court, our supreme cited as well as may court determine whether Kwalick, cited as decision which Amerimar been due in to arbitration has waived question. authority in proposition delay). since We decline to follow Amerimar ¶ 31 Because the instant dispute is, falls exists. That the license agreement be- within the scope of a valid arbitration tween Appellees and the Association indi- agreement and appellees’ because defenses cates that all among between or should arbitrator, have been left to the Association, the plan, plans find that the chancellor erred in failing to controlled affiliates must be submit- and/or order arbitration. We reverse the orders ted However, to arbitration. Appellees below and parties order the proceed contend that Highmark position is in no compel Appellees an Highmark to sell ownership and, Priority, interest First 32 Order reversed.
therefore, dispute there is no to arbitrate. Judge STEVENS files a Dissenting I agree with Appellees’ assertion. Opinion. ¶ 4 Highmark point any has failed to STEVENS, J., Dissenting. whereby contract Appellees mutually 1 I Highmark conclude to sell an in- ownership that the lower prop- court erly terest in Highmark’s Priority, denied First but failed to petition do so. compel parties arbitration and While the the possibility the motion discussed for reconsidera- Highmark interest, tion with regard buying ownership Specifically, thereto. I conclude that no exists, definite was ever dispute arbitrable reached. and, therefore, The concept simple: Appellees I cannot respectfully dissent. selling Highmark coerced into an own-
¶ 2 As the Majority correctly indicates, ership Priority First absent a when one an agreement seeks to binding directing contract such a sell. I prevent another proceeding from to arbi- note January joint operat- that the tration, this Court must determine wheth- ing agreement does not limit directly Ap- er a valid to arbitrate exists pellees’ ability operate and, so, parties if whether the and that Highmark exclusively operates is within involved Healthguard, providing an HMO services arbitration provision. Midomo Co. v. Pennsylvania. central Presbyterian Housing Dev. 180 (Pa.Super.1999). Where it is clear ¶ 5 Since Appellees compelled cannot be that no exists or to sell Highmark an ownership interest involved is not susceptible of an interpreta- First Priority, there is no to arbi- tion that dispute, covers a arbitration is such, affirm, and, trate. As I would there- properly denied. Pharmacy, Canter’s Inc. fore, I respectfully dissent.3 Assoc., Elizabeth (1990). “Arbitration, A.2d 1326 very
nature, presupposes the existence of a dis-
pute and an ability to decide favor of
one party against another. [Where exist,]
this does not arbitration.. .would be (citation omitted).
futile.” Id. at 1330
¶ 3 In the judice, case sub Appellees do that an event, I also note Majority concludes that any itless. In I would not reach the question waiver is a yet for the arbitrator then supra. waiver issue as noted finding makes a that the waiver claim is mer-