Evоnne K. WERT, Executrix of the Estate of Anna E. Kepner, Deceased v. MANORCARE OF CARLISLE PA, LLC d/b/a Manorcare Health Services-Carlisle; HCR Manorcare, Inc.; Manor Care, Inc.; HCR Healthcare, LLC; HCR II Healthcare, LLC; HCR III Healthcare, LLC; HCR IV Healthcare, LLC: GGNSC Gettysburg, LP, d/b/a Golden Living Center-Gettysburg; GGNSC Gettysburg GP, LLC; GGNSC Holdings, LLC; Golden Gate National Senior Care, LLC; GGNSC Equity Holdings, LLC; GGNSC Administrative Services, LLC.
Appeal of GGNSC Gettysburg LP, d/b/a Golden Living Center-Gettysburg; GGNSC Gettysburg GP, LLC; GGNSC Holdings, LLC; Golden Gate National Senior Care, LLC; GGNSC Equity Holdings, LLC and GGNSC Administrative Services, LLC.
Supreme Court of Pennsylvania
October 27, 2015
124 A.3d 1248
Argued: April 7, 2015.
The cure would not be complicated. A simple bifurcated trial on the questions of malice and falsity would eliminate the fiction that a jury could disregard the inadmissible evidence. That is, if the jury finds the articles were false, without hearing of the inadmissible judicial statements opining on falsity, that finding is fair; we are assured the prejudicial hearsay evidence was not considered. Only then would ex parte opinions on falsity be given to them, as evidence unique to the second question, malice. I view this as the best safeguard against unfair prejudice while providing appellants the latitude to present their case as they see fit.
For these reasons, I respectfully dissent.
Michael William Bootler, Esq., Matthew Thomas Corso, Esq., Buchanan Ingersoll & Rooney PC, for Manorcare of Carlisle PA, LLC, d/b/a Manorcare Health Services-Carlisle et al.
Stephen Trzcinski, Esq., Wikes & McHugh, P.A., for Evonne K. Wert, Executrix of the Estate of Anna E. Kepner, Deceased.
Barbara Axelrod, Esq., Beasley Firm, L.L.C. (The), for Pennsylvania Association for Justice.
Iris Y. Gonzales, Esq., for AARP Foundation Litigation.
Sol H. Weiss, Esq., Anapol Schwartz, for American Association for Justice.
SAYLOR, C.J., EAKIN, BAER, TODD, STEVENS, JJ.
OPINION ANNOUNCING THE JUDGMENT OF THE COURT
Justice STEVENS.
Golden Living Center-Gettysburg et al. (“Appellants“) appeal the Superior Court‘s decision affirming, in relevant part, the trial court‘s order overruling Appellants’ preliminary objections seeking to compel arbitration and reserving for trial the underlying negligence action filed by Evonne K. Wert (“Appellee“), daughter of Anna E. Kepner (“Decedent“) and
The following issues of first impression have been presented before this Court:
(a) Whether the Superior Court‘s decision in Stewart v. GGNSC-Canonsburg, L.P., 9 A.3d 215 (Pa.Super.2010), holding that the NAF Designation voided an identical Arbitration Agreement, was incorrectly decided and should be reversed, where there is no evidence indicating that the NAF dеsignation was integral to the Agreement?
(b) Whether the Court may ignore undisputed testimonial evidence that the party seeking to void the Agreement did not consider the NAF Designation to be an “integral part” of the Arbitration Agreement (because she did not bother to read the agreement)?
Wert v. ManorCare of Carlisle PA, LLC, 626 Pa. 114, 95 A.3d 268, 268-69 (2014) (per curiam order) (footnote omitted).
I. Background
Decedent resided in Appellants’ long-term skilled nursing care facility between March and August, 2010. Due to the alleged abuse and neglect inflicted upon her throughout her stay, Decedent suffered a multitude of injuries and illnesses that eventually resulted in her death. Appellee filed suit claiming Appellants knowingly sacrificed the quality of care given to their residents. Relevant to this appeal, Appellants filed preliminary objections seeking to enforce an arbitration agreement (“Agreement“) which Appellee signed, along with general admission paperwork upon Decedent‘s admission to the facility.1 Relying on Stewart v. GGNSC-Canonsburg,
The Superior Court affirmed in an unpublished memorandum opinion on December 19, 2013. See Wert v. ManorCare of Carlisle, 93 A.3d 514 (Pa.Super. filed Dec. 19, 2013) (unpublished memorandum). Finding itself bound by Stewart, the Superior Court declined to distinguish the NAF provision as non-integral based upon Appellee‘s deposition testimony that the NAF provision had nothing to do with her decision to sign the Agreement. Instead, the Superior Court found Appellee‘s statements showed that she did not consider the importance of the NAF provision. See Wert, supra (unpublished memorandum at 6-7) (“[Appellee]‘s testimony does not demonstrate she considered and then rejected the import of the NAF provisions. Rather, read in context, [Appellee]‘s testimony was
Judge Fitzgerald filed a concurring statement, wherein he noted that while he agreed the Superior Court was bound by Stewart, he was “troubled” by the implication that adopting NAF procedure indicated “only [the] NAF could administer the arbitration, where the document itself does not identify who shall administer the arbitration.” Wert, supra (Fitzgerald, J., concurring at 2).
Appellants filed a timely petition for allowance of appeal, and on June 24, 2014, we granted allocatur to address the issues as stated supra. The Pennsylvania Association for Justice (“PAJ“), American Association for Justice (“AAJ“), and American Association for Retired Persons (“AARP“) filed amicus briefs on behalf of Appellee.3
II. Discussion
A. Arguments of the Parties
1. Appellants
Appellants argue that the NAF provision is an ancillary and severable code of procedure based upon the plain text of the Agreement, terms and policy guidelines of the Federal Arbitration Act (“FAA“), and admissions of Appellee. Appellants emphasize that the Agreement‘s scope broadly favors arbitration, wherein the NAF cannot have been integral because it is “mentioned only once.” Appellants’ Brief at 26. Appellants claim that “[w]hat the Agreement‘s language does reflect is
Appellants contend while the Agreement selects a set of procedural rules, it lacks “an express statement designating a specific arbitrator.” Id. at 34. Appellants note that although the Superior Court in Stewart found, as fundamental terms, “(1) that the law governing the arbitration proceedings would be the NAF code, and (2) ... under the NAF Code, the arbitrators would be members of the NAF,” subsequent decisions in other jurisdictions indicate this is incorrect. Id. (quoting Stewart, 9 A.3d at 220). Appellants therefore argue that merely agreeing to a forum‘s code of procedure does not make the participation of the forum itself essential. Id. (citing Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787, 789 (7th Cir.2013) (finding “the [arbitration] agreement calls for use of the [NAF‘s] Code of Procedure, not for the [NAF] itself to conduct the proceedings“)).
Appellants assert the Stewart court altered the Code‘s specification in Rule 1(A) that it “shall be administered solely by the NAF” into a provision that “only [the] NAF was ‘authorized to administ[er] and apply the NAF Code.‘” Id. at 35 (emphasis in original). Appellants assert that the NAF Code “provides at the very beginning that the parties are always free to agree to other procedures beyond those contained [here]” and simply directs the parties to “select an arbitrator or panel of arbitrators ‘on mutually agreeable terms.‘” Appellants’ Reply Brief at 13 (citing NAF Code Rule 21(A)(1)). Appellants argue that these rules can be administered by any competent arbitrator and that their exclusivity provision is “unenforceable in light of the [NAF‘s] decision to cease conducting arbitrations.” Id. at 16 (quotation and internal quotation marks omitted).
Appellants claim Appellee distorts and misapplies other NAF Code Rules. For example, Appellants maintain that contrary to Appellee‘s claim that Rule 48(E) governs unavaila-
Appellants accordingly favor the South Dakota Supreme Court‘s interpretation of the NAF Code in an analogous case, where it explicitly rejected Stewart and found the agreement neither selected a particular adjudicator, specified qualifications or experience, nor chose the NAF as its place of forum. Wright v. GGNSC Holdings LLC, 808 N.W.2d 114, 119-20 & n. 6 (S.D.2011). Appellants emphasize that “the NAF[] ... does not employ its own arbitrators and merely provides a code of procedure to be followed by neutral arbitrators who may also provide arbitration for numerous other forums.” Appellants’ Brief at 36.
Appellants also underscore the Agreement‘s severability clause, which “indicates that the intention was not to make the [NAF] integral, [but] rather only to have a dispute resolution process through arbitration.” Appellants’ Reply Brief at 3 (quoting Jones v. GGNSC Pierre LLC, 684 F.Supp.2d 1161, 1167 (D.S.D.2010)). Appellants claim that by denying the “strong evidence that the overriding intent of the parties ... was to have covered disputes arbitrated, ... and that the identity of the arbitral forum, administrator and rules of application are secondary concerns[,]” Appellee reduces the severability clause into mere surplusage. Id. at 3 (citations omitted). See Lesko v. Frankford Hospital-Bucks County, 609 Pa. 115, 15 A.3d 337, 342 (2011) (stating courts “will not interpret one provision of a contract in a manner which results in another portion being annulled” (quotation and quotation marks omitted)).
Appellants further maintain the FAA “embodies an emphatic federal policy in favor of arbitral dispute resolution” that courts have consistently supported. Appellants’ Brief at 40 (citing AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (noting the FAA‘s “liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary” (citation omitted)). See Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 861, 79 L.Ed.2d 1 (1984) (stating the FAA is “intended to foreclose state legislative attempts to undercut the enforceability of arbitration agree-
Finally, Appellants maintain that Appellee‘s admissions “unequivocally demonstrate[]” that the NAF provision was non-integral to the Agreement. Id. at 22. Appellants highlight that Appellee testified that she did not read the Agreement, much less understand and form an opinion on its NAF provision. In addition, Appellants remark that in Jones, the court found a similar provision enforceable because the plaintiff signed the agreement on her mother‘s behalf without reviewing or negotiating its terms. Id. at 24 (citing Jones, 684 F.Supp.2d at 1168; Meskill, 862 F.Supp.2d at 975 (noting the lack of evidence that “the ‘exclusive’ designation of the NAF was an important consideration to ... [the plaintiff]” and that the record did not indicate “[the plaintiff] was even aware of the NAF (or its Code) when he signed the Arbitration Agreement“)). Appellants fault the Superior Court for “excus[ing Appellee‘s] failure to read the Agreement due to the fact that
Anticipating Appellee‘s counterargument that her testimony is inadmissible because the Agreement is unambiguous, Appellants assert that parol evidence is only forbidden “to explain or vary the terms of the contract.” Id. at 28 (quoting Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425, 437 (2004) (quotation marks omitted)). Rather, Appellants offer the testimony “for the purpose of demonstrating that even if a NAF arbitrator were required then the Agreement may still be enforced because that term was not ‘integral’ to either party.” Id. at 29-30 (emphasis in original) (citation omitted).
Appellants maintain there are other “compelling reasons” for admission of the testimony because the Agreement does not specify which terms are integral and is ambiguous regarding whether the parties intended to adjudicate disputes exclusively before an NAF arbitrator. Id. at 31-32 (citing Metzger v. Clifford Realty Corp., 327 Pa.Super. 377, 476 A.2d 1, 5 (1984) (stating that “[w]here the language of the written contract is ambiguous, extrinsic or parol evidence may be considered to determine the intent оf the parties“); Bickley v. Bickley, 301 Pa.Super. 396, 447 A.2d 1025, 1029 (1982) (noting that “where a document is silent on a particular subject, it may be proved by parol evidence of what took place at the time of execution“). Appellants also argue that Appellee waived any claim that her testimony is inadmissible by not
2. Appellee
Appellee counters that the Superior Court‘s decisions in Stewart and herein were correctly decided because the NAF provisions “are clearly essential” to the Agreement since, by its own terms, only the NAF can administer its rules and procedures. Appellee‘s Brief at 18. Appellee also claims the FAA cannot rescue the Agreement because its “lapse” provision triggers only when the arbitrator is unavailable, not the forum. Appellee further asserts that even if it were admissible, her deposition testimony has no probative value in relation to a contractual ambiguity.
After reiterating the Superior Court‘s reasoning in Stewart, Appellee remarks that its holding “is supported by a majority of decisions that have analyzed lаnguage similar to that in the Agreement.” Id. at 24 (quotation, quotation marks, and footnote omitted).6,7 Appellee highlights that in Stewart the Supe-
Appellee adds that beyond “espousing the FAA‘s policy in favor of arbitration,” Appellants fail to show why the FAA Superior Court on adequate and independent bases, this issue needs no further review.
Appellee declares Appellants’ reliance on Marmet is misplaced, emphasizing that “the Supreme Court overturned a ‘categorical rule prohibiting arbitration of a particular type of claim’ in West Virginia.” Id. at 47 (emphasis in brief) (quoting Marmet, 565 U.S. at 533, 132 S.Ct. at 1203-04). Rather, the West Virginia Supreme Court was free to determine whether “the arbitration clauses ... are unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA.” Id. (emphasis in brief) (quoting Marmet, 565 U.S. at 534, 132 S.Ct. at 1204). Appellee therefore asserts that Marmet “reinforces” the Superior Court‘s
Appellee contends if this Court looks beyond the clear and unambiguous language of the Agreement, her deposition testimony cannot be used as extrinsic evidence because it lacks evidentiary value. Id. at 32. While Appellee does not contest that she signed the Agreement before reading it, she asserts that her subjective appreciation of the NAF provision is irrelevant with regard to its integrality. Appellee underscores that the contract‘s terms are clear and hence dictate the intent of the parties as expressly written. Id. at 32-33 (citing Steuart v. McChesney, 498 Pa. 45, 444 A.2d 659, 661 (1982) (barring ambiguity, “intent is to be discovered only from the express language of the agreement“)). Appellee notes that the Agreement states: “[A]ny disputes between the parties ‘shall be resolved exclusively through binding arbitration’ conducted ‘in accordance with the [NAF] Code of Procedure, which is hereby incorporated into this Agreement ....’ In turn, the NAF‘s Code of Procedure provides that ‘only’ the NAF may administer its Code of Procedure.” Id. at 35 (emphasis in original) (citations omitted). Appellee therefore argues that the Agreement‘s “explicit and mandatory language” and “express incorporation of the NAF Code” evince the parties’ intent to arbitrate only before the NAF, making it integral regardless of the lack of express statement to that effect. Id. at 35.
Appellee further asserts that if this Court finds the Agreement unclear, her testimony still cannot be admitted under the parol evidence rule because Appellants’ claim of ambiguity relates only to whether the parties agreed to arbitrate exclusively before the NAF. Appellee emphasizes that “[she] cannot say that she placed importance on any term in the agreement.” Appellee‘s Brief at 41 (emphasis in original). Appellee therefore accuses Appellants of trying to “have it both ways” by “attempt[ing] to use [Appellee]‘s statement that she did not read the Agreement to establish that the NAF designation is non-integral” while simultaneously “maintain[ing] that these same contractual terms demonstrate that [Appellee] clearly intended to arbitrate pursuant to the FAA.” Id. at 42.10
B. Standard of Review and Relevant Law
Issues of contractual interpretation are questions of law. Accordingly, this Court‘s standard of review is de novo and its scope is plenary. McMullen v. Kutz, 603 Pa. 602, 985 A.2d 769, 773 (2009). A contract shall be interpreted in accordance with the parties’ intent. Lesko, 15 A.3d at 342. When a written contract is clear and unambiguous, the pаrties’ intent is contained in the writing itself. Insurance Adjustment Bureau, Inc. v. Allstate Ins. Co., 588 Pa. 470, 905 A.2d 462, 468 (2006); Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385, 390 (1986). A party will be bound by this writing regardless of whether he or she read and fully understood its terms. See generally Samuel-Bassett v. Kia Motors
Parol evidence is only admissible to resolve ambiguities, though ambiguities may be “latent[ and] created by extrinsic or collateral circumstances.” Adjustment Bureau v. Allstate, 905 A.2d at 468 (citing Steuart, 444 A.2d at 663). An ambiguity is present if the contract may reasonably be construed in more than one way. Kripp v. Kripp, 578 Pa. 82, 849 A.2d 1159, 1163 (2004). When examining the intentions of the parties in relation to an ambiguity, “the court must look at the circumstances under which the [contract] was made.” In re Estate of Quick, 588 Pa. 485, 905 A.2d 471, 475 (2006) (quotation and quotation marks omitted). Any ambiguities shall be construed against the contract drafter. Shovel Transfer and Storage, Inc. v. Pennsylvania Liquor Control Bd., 559 Pa. 56, 739 A.2d 133, 139 (1999).
The severability of a contract may be apparent from its explicit language. Jacobs v. CNG Transmission Corp., 565 Pa. 228, 772 A.2d 445, 452 (2001). Regardless, “[t]he courts are not generally available to rewrite agreements or make up special provisions for parties who fail to anticipate foreseeable prоblems.” In re Estate of Hall, 517 Pa. 115, 535 A.2d 47, 56 n. 7 (1987). Arbitration clauses are no more or less valid, enforceable, or irrevocable than any other contractual provision. Borough of Ambridge Water Authority v. Columbia, 458 Pa. 546, 328 A.2d 498, 500 (1974).
C. Analysis
As noted supra, numerous cases involving similar agreements have been litigated across the nation. This case involves competing precedents: Appellee asks this Court to
The integrality of the NAF provision hinges in significant part on the weight and admissibility of Appellee‘s admissions. Addressing this issue at the forefront, we note that Appellants’ liberal citations to non-controlling jurisdictions notwithstanding, Pennsylvania courts have perennially held:
[W]hen a written contract is clear and unequivocal, its meaning must be determined by its contents alone. It speaks for itself and a meaning cannot be given to it other than that expressed. Where the intention of the parties is clear, there is no need to resort to extrinsic aids or evidence. Hence, where lаnguage is clear and unambiguous, the focus of the interpretation is upon the terms of the agreement as manifestly expressed rather than as, perhaps, silently intended.
Lesko, 15 A.3d at 342 (quoting Steuart, 444 A.2d at 661) (emphasis in original).
Assuming, arguendo, that Appellee‘s testimony is admissible to address a latent ambiguity, we find her failure to read the Agreement does not implicate the importance of its NAF provision; thus, her subjective understanding of the Agreement is irrelevant to this case. Appellee is not rewarded for hastily signing the Agreement, nor do her actions implicate the mandate that “the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000) (citations omitted). Rather, we recognize that premising the integrality of a contractual term on the subjective understanding of a far less sophisticated non-drafting party is ill-advised public policy that would further distort an already lopsided balance of power. It follows, then, that a similarly situated non-drafting party could not use her failure to read as
Furthermore, Appellants’ desired interpretation would not place arbitration agreements on equal footing with other contracts. It wоuld instead encourage drafting parties to forego integration clauses and excuse their failure to account for foreseeable issues within the four corners of the agreement by pointing to the less sophisticated party‘s inability to understand its terms. See Yocca, 854 A.2d at 436 (“An integration clause which states that a writing is meant to represent the parties’ entire agreement is also a clear sign that the writing is meant to be just that....” (citations omitted)).
The Agreement provides that arbitration shall be conducted “exclusively ... in accordance with the [NAF] Code of Procedure, which is hereby incorporated into this Agreement[ ], ... [and that t]his agreement shall be governed [by] and interpreted under the [FAA],
Turning to the NAF Code of Procedure, Rule 1(A) states:
Parties who contract for or agree to arbitration provided by the Forum or this Code of Procedure agree that this Code governs their arbitration proceedings, unless the Parties agree to other procedures. ... This Code shall be administered only by the [NAF] or by any entity or individual providing administrative services by agreement with the [NAF].
NAF Code, Rule 1(A). Although Appellants emphasize that the NAF is not required to administer and apply the Code, this is a distinction without a difference. Besides the fact that per the consent decree no NAF entity may “[a]dminister or process any new Consumer Arbitration,” Black‘s Law Dictionary defines “administer” as “[t]o manage (work or money) for a business or organization.” Consent Decree, State of Minnesota v. National Arbitration Forum (No. 27-CV-09-18550, Minn.Dist.Ct., July 17, 2009); BLACK‘S LAW DICTIONARY 52 (10th ed.2014). “Manage,” in turn, is defined as “[t]o conduct, control, carry on, or supervise.” Id. at 1103-04. The NAF no longer does any of these things with respect to consumer arbitration disputes. In addition, the NAF Code defines an arbitrator as “[a]n individual selected in accord with the Code or an Arbitration Agreement to render Orders and Awards ....” NAF Code, Rule 2(F). The NAF Code also notes “[t]he National Arbitration Forum [et al.] constitute the administrative organizations conducting arbitrations under this Code.” NAF Code, Rule 2(S).14
If in the agreement provision be made for a method of naming or appointing an arbitrator ..., such method shall be followed; but ... if for any [ ] reason there shall be a lapse in the naming of an arbitrator ..., then upon the application of either party to the controversy the court shall designate and appoint an arbitrator ..., who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein[.]
Pursuant to the reasoning of the Stewart court and the majority of our sister jurisdictions, we find that, post-consent deсree, Section five of the FAA cannot preserve NAF-incorporated arbitration agreements unless the parties made the NAF‘s availability non-essential by specifically varying the terms of its procedure.17 Regardless of whether Section five may apply where there is a lapse in the administrator, by its own rules, the NAF must administer its code unless the parties agree to the contrary. The parties here agreed that any disputes “shall be resolved exclusively by binding arbitration to be conducted ... in accordance with the [NAF] Code of Procedure, which is hereby incorporated into this Agreement[.]” R. 348a (emphasis added). We therefore find the provision integral and non-severable. Doing otherwise would
III. Conclusion
For the reasons set forth above, we decline to overturn Stewart as incorrectly decided. We, therefore, affirm the order of the Superior Court and remand to the trial court for further proceedings consistent with this decision.
Justice TODD joins the lead opinion.
Chief Justice SAYLOR files a concurring opinion.
Justice EAKIN files a dissenting opinion.
Justice BAER files a dissenting opinion.
Chief Justice SAYLOR, concurring.
Although I have differences with the rationale set forth in the Opinion Announcing the Judgment of the Court, I support the result for many of the reasons articulated by Judge Hamilton of the United States Court of Appeals for the Seventh Circuit in his dissenting opinion in Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787 (7th Cir.2013). In addition to agreeing with Judge Hamilton‘s analysis of Rules 1(A) and 48(D) of the National Arbitration Forum (“NAF“) Code, see id. at 795-96 (Hamilton, J., dissenting), I am aligned with his position that it is not the courts’ role to compensate for the negligence of an entity presenting a form contract in a consumer-oriented setting which this entity knew or should have known could not be enforced on its own terms. See id. at 793. See generally Majority Opinion, at 273, 124 A.3d at 1255-56 (explaining that the arbitration agreement at issue in the present case was executed eight months after the NAF‘s decision to withdraw from the field of consumer arbitrations). To the extent that unwanted consequences must attend such a patent drafting error, from my point of view these are more
Finally, although I certainly recognize the federal and state policies favoring arbitration, I also believe it is important to acknowledge the inauspicious circumstances surrounding the NAF‘s decision to forego administering consumer arbitrations, in that the organization entered into a consent decree with a state attorney general after having been sued on the allegation that it colluded with businesses relative to their disputes with consumers. See id. at 794. See generally Note, Nicole Wanlass, No Longer Available: Critiquing the Contradictory Way Courts Treat Exclusive Arbitration Forum Clauses When the Forum Can No Longer Arbitrate, 99 MINN. L. REV. 2005, 2009 (2015). To the degree that such allegations cannot be discounted, reflexive adherence to the courts’ self-protective preferences for arbitration—particularly relative to agreements which are incapable of enforcement according to their own terms—would be problematic.
Justice EAKIN, dissenting.
I respectfully dissent, as I cannot agree with the Majority‘s conclusion the National Arbitration Forum (NAF) provision was integral to the arbitration agreement, making the entire agreement void because of the NAF‘s problems in Minnesota. The Majority invalidates the entire agreement based upon its NAF Code provision, which states arbitration must be conducted “in accordance with the [NAF] Code of Procedure[,]” Agreement, at 1. While the NAF may be out of the business of accepting arbitrations, that Code is still extant, and it is the Code, not the NAF itself, that is incorporated into thе agreement.
Further, the Majority ignores the agreement‘s other provisions, which conspicuously provide, ”THE PARTIES UNDERSTAND AND AGREE THAT THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES[.]” Id., at 2 (emphasis in original). Nowhere does it suggest the NAF must be the arbitrator. Even if it did, the agreement also
Thus, the question is whether the Code or the agreement demands an NAF arbitrator, and the answer is that neither does—interpreting such a requirement into them is inappropriate. The Majority‘s reliance upon extraneous sources to conclude the NAF Code provision required an NAF arbitrator to conduct arbitration is misguided. See Majority Op., at 282-84, 124 A.3d at 1261-63 (citing NAF Code, Rules 1(A), 2(F), 2(S), 21(A)(1), & 48(B); Black‘s Law Dictionary 52, 1103-04 (10th ed.2014);
The fact is the NAF Code provision does not designate any specific arbitrator. This silence within a contractual provision, as within a statutory provision, does not constitute an ambiguity per se. See Levy v. Senate of Pa., 619 Pa. 586, 65 A.3d 361, 383 (2013) (Eakin, J., concurring) (“That the statute does not address the specific question before us does not mean it is ambiguous[.]“). Rather, ambiguity arises only where there are at least two reasonable interpretations of the subject language. See Warrantech Consumer Prods. Servs., Inc. v. Reliance Ins. Co., 626 Pa. 218, 96 A.3d 346, 354-55 (2014) (“A statute is ambiguous when there are at least two reasonable interpretations of the text under review.” (citation omitted)).
In my view, the agreement‘s reliance on a non-existent Code provision of a now-dormant organization does not negate the requirement of arbitration. Contrary to the Majority‘s interpretive largess, the provision does not specifically require an NAF arbitrator to conduct arbitration. As the NAF Code is
I also must disagree with the muddled holding that “the FAA cannot preserve NAF-incorporated arbitration agreements unless the parties made the NAF‘s availability non-essential by specifically varying the terms of its procedure.” Majority Op., at 284, 124 A.3d at 1263. One must be uncertain what is meant by stating “varying the terms of [NAF‘s] procedure” can make NAF‘s ”availability non-essential[,]” id. (emphasis added); procedure and availability are not the same thing, such that varying a procedure may eliminate availability. In any event, as discussed, availability is not a part, much less an essential part, of the agreement the parties executed.
Also unconvincing is the reliance on Stewart v. GGNSC-Cononsburg, L.P., 9 A.3d 215 (Pa.Super.2010). See Majority Op., at 1262-63. Federal appellate decisions subsequent to Stewart are persuasive and I would therefore overrule Stewart. In particular, as Chief Judge Easterbrook concluded, “arbitration clauses remain enforceable if[,] for ‘any’ reason[,] there is ‘a lapse in the naming of an arbitrator[.]’ ” Green v. U.S. Cash Advance Ill., LLC, 724 F.3d 787, 791-92 (7th Cir.2013) (quoting
Accordingly, I would reverse the Superior Court‘s order, and must respectfully dissent.
Justice BAER, dissenting.
Like the Superior Court, the Majority has decided to repudiate the arbitration agreement entered into by the parties, Golden Living Center-Gettysburg et al. (Appellants) and Evonne K. Wert (Appellee), and to compel Appellants to litigate the dispute in the trial court. I perceive this result to be contrary to the plain language of the arbitration agreement, which provided that the agreement was intended to require arbitration and to preclude a lawsuit or court process, and to flow from a leap in logic that finds no support in the actual agreement or governing law, as explained below. Accordingly, I dissent.
Public policy in this Commonwealth favors arbitration agreements. See Fastuca v. L.W. Molnar & Assoc., 608 Pa. 187, 10 A.3d 1230, 1245 (2011) (“As our Court has obsеrved on repeated occasions, the settlement of disputes by arbitration is favored by the public policy of this Commonwealth and is, therefore, encouraged by our courts and by statute.“); Borgia v. Prudential Ins. Co., 561 Pa. 434, 750 A.2d 843, 850-51 (2000); Johnson v. Pennsylvania Nat. Ins. Companies, 527 Pa. 504, 594 A.2d 296, 300 (1991); Flightways Corp. v. Keystone Helicopter Corp., 459 Pa. 660, 331 A.2d 184, 185 (1975); Ice City, Inc. v. Ins. Co. of N. Am., 456 Pa. 210, 314 A.2d 236, 241 (1974) (“It is beyond cavil that settlement of disputes by arbitration or appraisal is the approved public policy of this Commonwealth.“); Mendelson v. Shrager, 432 Pa. 383, 248 A.2d 234, 235 (1968) (“[O]ur statutes encourage arbitration and with our dockets crowded and in some jurisdictions congested arbitration is favored by the courts.“); Capecci v. Joseph Capecci, Inc., 392 Pa. 32, 139 A.2d 563, 565 (1958) (recognizing that “[t]he public policy of this State is to give effect to arbitration agreements,” and providing that “[w]here the parties by contract contemplate the settlement of disputes by
Because Pennsylvania favors arbitration, it is consistent with the federal policy of also favoring arbitration enforcement. Moscatiello v. Hilliard, 595 Pa. 596, 939 A.2d 325, 329 (2007). See also Bhatia v. Johnston, 818 F.2d 418, 421 (5th Cir.1987) (recognizing that “the question of arbitrability [is to] be addressed with a ‘healthy regard for the federal policy favoring arbitration,’ with doubts regarding the scope of the agreement resolved in favor of arbitration.” (quoting Moses H. Cone Mem‘l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983))); Salley v. Option One Mortgage Corp., 592 Pa. 323, 925 A.2d 115, 118 (2007) (acknowledging the liberal federal policy favoring arbitration agreements); Thibodeau v. Comcast Corp., 912 A.2d 874, 878-80 (Pa.Super.2006).1
With this background in mind, and tо analyze the terms of this particular arbitration agreement, we should be clear about what the agreement did, and did not say. As the Majority relates, the agreement provided that any ensuing litigation “shall be resolved exclusively by binding arbitration ... in accordance with the National Arbitration Forum Code of
Notably, the arbitration agreement did not name an arbitrator, and most certainly did not provide that the National Arbitration Forum (NAF) was the only entity that could serve as arbitrator. The Majority‘s holding that the arbitration agreement required that arbitration be conducted by the NAF departs from the plain language of the agreement. Agreeing to utilize а certain set of procedural rules does not name the administering body of those rules as solo arbitrator. As Judge Easterbrook observed in interpreting a similar arbitration agreement in favor of arbitration, “[i]f [the agreement] were designed to require arbitration to be conducted by [NAF] exclusively, the reference to its Code would be surplusage; the only reason to refer to the Code is to create the possibility of arbitration outside the [NAF]‘s auspices, but using its rules of procedure.” Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787, 789 (7th Cir.2013). See also Wert v. Manorcare of Carlisle et al., No. 1746 MDA 2012, 93 A.3d 514 (Pa.Super. Dec. 19, 2013) (Fitzgerald, J., concurring) (“I would not find that the agreement to arbitrate pursuant to the NAF Code is coterminous with agreement that only NAF could administer the arbitration, where the document itself does not identify who shall administer the arbitration.“).
Although the NAF Code of Procedure provides, in Rule 1.A, that it shall be administered by the NAF, this is not the same as requiring NAF to act as sole arbitrator. While the NAF administers its Code of Procedure, there is nothing limiting another arbitrator from employing the code to arbitrate the parties’ dispute. An agreement to arbitrate in accord with the
To the extent that one can interpret Rule 1.A as providing that the NAF Code of Procedure depends on the NAF as arbitrator, a proposition of which I remain unconvinced, it is unenforceable because of NAF‘s unavailability. Under such circumstances, Rule 1.A is qualified by Rule 48.C, which provides that if a portion of the NAF Code of Procedure is unenforceable, the remainder of the code will continue in effect. See Green, 724 F.3d at 789. Accordingly, the NAF‘S Code of Procedure remains in effect even where the NAF is not serving as arbitrator.
Moreover, the Code of Procedure also provides in Rule 48.D that “[i]f Parties are denied the opportunity to arbitrate a dispute ... before the [NAF], the Parties may seek legal and other remedies in accord with applicable law.” Green, 724 F.3d at 789. Here, the parties, in their agreement, identified the FAA as such an applicable law. Section 5 of the FAA permits a court, upon request, to appoint a substitute arbitrator.
Additionally, the severability clause of this agreement further indicates the parties’ intention to preserve their agreement to arbitrate in the event a portion of the agreement is found unenforceable. When parties consent in an agreement
Although, as the Majority recognizes, there is a split of authority by courts interpreting similar arbitration agreements that rely on the NAF Code of Procedure, the force of logic employed by those courts enforcing the arbitration agreement with a substituted arbitrator3 is more persuasive than the fiction created by those courts that have thrown out the arbitration agreement by equating use of the NAF Code of Procedure with an identification of the NAF as sole arbitrator.4
In affirming the trial court‘s finding that the agreement was unenforceable because the NAF could not serve as arbitrator, the Superior Court relied on its prior decision in Stewart v. GGNSC-Canonsburg, L.P., 9 A.3d 215 (Pa.Super.2010), a decision which I believe, in aсcord with my opinion herein, is not supportable. Although the arbitration agreement interpreted and cast aside in Stewart mirrored the agreement utilized by the parties in this case, the Superior Court‘s decision therein suffered from the same leap in logic I have identified in the Majority‘s present analysis: it equated the agreement‘s invo-
Accordingly, I disagree with the Majority that the agreement identified the arbitrator, and that the unavailability of this arbitrator vitiates the entire agreement. Rather, the agreement invoked a set of procedural rules while remaining silent on the identity of the arbitrator. Because the parties selected arbitration, courts should not utilize logical fallacies or rely on nonexistent contractual terms to throw the baby out with the bathwater.
124 A.3d 1269
LANCASTER COUNTY
v.
PENNSYLVANIA LABOR RELATIONS BOARD, American Federation of State, County and Municipal Employees, AFL-CIO District Council 89, Intervenor.
Appeal of Pennsylvania Labor Relations Board.
Lancaster County
v.
Pennsylvania Labor Relations Board, American Federation of State, County and Municipal Employees District Council 89, Intervenor.
Appeal of American Federation of State, County and Municipal Employees District Council 89, Intervenor.
Supreme Court of Pennsylvania.
Argued March 11, 2015.
Decided Oct. 27, 2015.
Notes
Indeed, the Federal Arbitration Act (FAA) was enacted to ensure the enforcement of arbitration agreements, as the Supreme Court has explained:[A]ny and all claims, disputes, and controversies ... shall be resolved exclusively by binding arbitration to be conducted at a place agreed upon by the Parties, or in the absence of such an agreement, at the Facility, in accordance with the National Arbitration Forum Code of Procedure, which is hereby incorporated into this Agreement[], and not by a lawsuit or resort to court process. This agreement shall be governed [by] and interpreted under the Federal Arbitration Act,
9 U.S.C. Sections 1-16 . . . . In the event a court having jurisdiction finds any portion of this agreement unenforceable, that portion shall not be effective and the remainder of the agreement shall remain effective. . . . THE PARTIES UNDERSTAND AND AGREE THAT THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES, AND THAT BY ENTERING INTO THIS ARBITRATION AGREEMENT, THE PARTIES ARE GIVING UP AND WAIVING THEIR CONSTITUTIONAL RIGHT TO HAVE ANY CLAIM DECIDED IN A COURT OF LAW BEFORE A JUDGE AND A JURY, AS WELL AS ANY APPEAL FROM A DECISION OR AWARD OF DAMAGES. R. 348a-49a (emphasis in original).
Volt Info. Sciences, Inc. v. Bd. of Tr. of the Leland Stanford Jr. Univ., 489 U.S. 468, 478 (1989).The FAA was designed “to overrule the judiciary‘s longstanding refusal to enforce agreements to arbitrate,” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219-220 (1985), and to place such agreements “upon the same footing as other contracts,” Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974) (quoting H.R.Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924)). While Congress was no doubt aware that the Act would encourage the expeditious resolution of disputes, its passage “was motivated, first and foremost, by a congressional desire to enforce agreements into which parties had entered.” Byrd, 470 U.S. at 220. ... [The FAA] simрly requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12 (1967) (the Act was designed “to make arbitration agreements as enforceable as other contracts, but not more so“).
If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise provided in the agreement the arbitration shall be by a single arbitrator.
See, e.g., Ranzy v. Tijerina, 393 Fed.Appx. 174 (5th Cir.2010); Licata v. GGNSC Malden Dexter, LLC, 29 Mass. L. Rep. 467, 2012 WL 1414881 at *8 (Mass.Super.2012); Stewart v. GGNSC-Canonsburg, 9 A.3d 215 (Pa.Super.2010); GGNSC Tylertown LLC v. Dillon, 87 So.3d 1063, 1066 (Miss.Ct.App.2011); Geneva-Roth, Capital, Inc. v. Edwards, 956 N.E.2d 1195, 1203 (Ind.App.2011), cert. den., --- U.S. ---, 133 S.Ct. 650, 184 L.Ed.2d 459 (2012).[I]f for any [] reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein . . . .
9 U.S.C. § 5 .
We note that, in the Chicago-Kent College of Law‘s Seventh Circuit Review, Christine L. Milkowski makes a strong case that “the [Green] Court has zealously applied Section [two] of the FAA, which states arbitration agreements shall be ‘valid, irrevocable and enforceable,’ to favor arbitration over litigation.” Christine L. Milkowski, Expanding the Scope of the Federal Arbitration Act: An Examination of the Seventh Circuit‘s Opinion in Green v. U.S. Cash Advance, Illinois, LLC, 9 SEVENTH CIRCUIT REV. 50 (2013). See http://www.kentlaw.iit.edu/Documents/Academic%20Programs/7CR/v9-1/Milkowski.pdf. In addition to criticizing Judge Easterbrook‘s majority opinion, Milkowski favorably cites key portions of Judge Hamilton‘s dissent, asserting that “[u]nlike the majority, which severed the rules of the NAF Code of Procedure that did not support its opinion, Judge Hamilton used the Rules in a common sense way to support the natural reading of the arbitration agreement.” Id. at 72-73 (citing Green, 724 F.3d at 795-96 (Hamilton, J., dissenting)). To the extent Section five of the FAA may trigger the appointment of a substitute arbitrator, Milkowski notes, in relevant part, “that there was no correctable ‘lapse’ when the drafters of the agreement named an arbitration forum that was never available.” Id. at 73 (citing Green, 724 F.3d at 797 (Hamilton, J., dissenting)).