Collier, J. v. National Penn Bank , 128 A.3d 307 ( 2015 )

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2015 PA Super 246JENNIFER COLLIER, ON BEHALF OF IN THE SUPERIOR COURT OF
HERSELF AND ALL OTHERS SIMILARLY PENNSYLVANIA
SITUATED,
Appellee
v.
NATIONAL PENN BANK, NATIONAL PENN
BANCSHARES, INC. AND KNBT
BANCORP, INC.,
Appellant No. 976 EDA 2014
Appeal from the Order Entered February 18, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): June Term, 2012 No. 01036
BEFORE: BOWES, MUNDY, AND FITZGERALD* JJ.
OPINION BY BOWES, J.: FILED NOVEMBER 24, 2015
National Penn Bank, National Penn Bancshares, Inc., and KNBT
Bancorp, Inc. (collectively “National Penn”) appeal from the February 18,
2014 order overruling their preliminary objections in the nature of a petition
to compel arbitration and a demurrer. After careful review, we affirm in
part, and quash in part.
Jennifer Collier commenced this class action in the Court of Common
Pleas of Philadelphia against National Penn on behalf of herself and others
similarly situated. The gist of her complaint is that National Penn, in breach
of a 2010 Account Agreement, improperly assessed overdraft fees when her
account, and the accounts of those similarly situated, were not overdrawn.
*
Former Justice specially assigned to the Superior Court.
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National Penn countered that Ms. Collier’s overdraft fees were assessed on a
checking account governed by a 2008 Agreement that used “available
balance” rather than “ledger balance” when determining whether such fees
should be assessed. It further averred that, since that Agreement contains
an agreement to arbitrate disputes, this controversy should be referred to
arbitration.
National Penn removed the action to the United States District Court
for the Eastern District of Pennsylvania, but that court granted Ms. Collier’s
motion for remand. National Penn then filed preliminary objections in the
nature of a petition to compel arbitration and a demurrer premised on
preemption of all claims by federal banking law. All preliminary objections
were overruled by order dated February 18, 2014. In denying the
preliminary objections seeking to compel arbitration, the trial court found
there was no agreement to arbitrate. In overruling the demurrer, the court
rejected preemption.
National Penn appealed. In its Pa.R.A.P. 1925(b) statement, it alleged
error in the court’s refusal to enforce the arbitration agreement and in
finding that Ms. Collins’ state law breach of contract, conversion, unjust
enrichment, and Pa. Unfair Trade Practices and Consumer Protection Law
claims were not pre-empted by the National Bank Act, 12 U.S.C. § 21 et seq.
In its Rule 1925(a) opinion, the trial court noted that only that portion of its
order denying the preliminary objections in the nature of a petition to
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compel arbitration was appealable. Taylor Shadduck v. Christopher J.
Kaclik, Inc., 713 A.2d 635, 636 (Pa.Super. 1998); see also Pa.R.A.P.
311(a)(8) and 42 Pa.C.S. § 7320 et seq. The court opined further that its
order overruling the demurrer based on preemption was neither an
appealable interlocutory order nor a collateral order, and thus, not subject to
appellate review.
On appeal, National Penn presents two issues for our review:
1. Whether the trial court erred in denying National Penn’s
preliminary objection in the nature of a motion to compel
arbitration and for a stay of the litigation pursuant to the
Pennsylvania Arbitration Act and/or Federal Arbitration Act
because the written account agreement applicable to Ms.
Collier’s bank account referenced in the Complaint contains an
enforceable arbitration agreement and all of the claims in the
Complaint fall with the scope of the arbitration agreement?
2. Whether the trial court erred in denying National Penn’s
preliminary objection in the nature of a demurrer to all claims
in the Complaint based on federal preemption because all of
Ms. Collier’s claims are preempted by the National Bank Act,
12 U.S.C. § 21 et seq., and federal regulations promulgated
by the Office of the Comptroller of the Currency?
Appellant’s brief at 6-7.
Our jurisdiction to review the propriety of the trial court’s order
overruling preliminary objections in the nature of a motion to compel
arbitration is conferred by Pa.R.A.P. 311(a)(8), which provides that an
interlocutory appeal may be taken as of right from any order made
appealable by statute, and by 42 Pa.C.S. § 7320(a)(1) of the Uniform
Arbitration Act, which authorizes an appeal from "[a] court order denying an
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application to compel arbitration.” We review such a claim “for an abuse of
discretion and to determine whether the trial court's findings are supported
by substantial evidence.” Taylor v. Extendicare Health Facilities, Inc.,
113 A.3d 317, 320 (Pa.Super. 2015). We employ a two-part test to
determine whether arbitration was proper. First, we ascertain whether a
valid agreement to arbitrate exists. If so, we examine whether the dispute
is within the scope of the agreement. Pisano v. Extendicare Homes,
Inc., 77 A.3d 651, 654 (Pa.Super. 2013); see also Elwyn v. DeLuca, 48
A.3d 457, 461 (Pa.Super. 2012).
National Penn contends that the trial court’s denial of its petition to
compel arbitration was based on an incorrect finding that the 2010 Account
Agreement, rather than the 2008 Account Agreement, controlled. It argues
that the finding was unsupported by the evidence and that the court failed to
credit the unrefuted affidavit of Carol Franklin.1 Ms. Franklin stated therein
that the 2008 account agreement containing the arbitration clause was sent
to Ms. Collier in 2008 after National Penn acquired KNBT where Ms. Collier
had previously maintained an account. The 2010 Agreement, according to
Ms. Franklin, was sent to Ms. Collier in connection with a second account
____________________________________________
1
The trial court characterized the affidavit as “bald statements” and
“nothing more than self-serving declarations” which were “in direct
contravention of the plain and unambiguous language” of the deposit
agreements.
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that she opened in 2010, and Ms. Franklin maintained that it did not apply to
or supersede the 2008 Agreement that governed the first checking account
which incurred the overdraft fees. National Penn contends that since the
2010 Agreement contains no language suggesting that it was intended to
supersede the 2008 Agreement, the court should have accepted the
unrefuted affidavit as true. Id. Additionally, National Penn relies upon
language in both Agreements referring to the operation of “this account” as
indicating that there were separate agreements for Ms. Collier’s two
accounts and contends that the trial court incorrectly assumed that there is
only one account agreement per customer.
Ms. Collier based her claims on National Penn’s 2010 Personal Business
Deposit and Electronic Banking Services Agreement and Disclosure, effective
March of 2010. It is her position that the 2010 Agreement expressly
superseded the earlier 2008 Agreement, and the trial court properly found
no valid agreement to arbitrate as the 2010 Agreement did not contain an
arbitration clause.2 She relies upon two federal decisions holding that a later
account agreement superseded an earlier one, and that, by continuing to
use the account, she indicated her intention to be bound by the later
____________________________________________
2
Ms. Collier also offered additional bases to affirm the trial court’s finding
that there is no valid agreement to arbitrate based on the 2008 agreement,
among them, that the sole arbitrator designated in the agreement is
unavailable and that the arbitration clause is unconscionable and illusory.
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agreement. In Dottore v. Huntingdon, 2010 WL 3861010 (N.D. Ohio
2010), affirmed 480 Fed Appx. 351 (6th Cir. 2012), the customer and the
bank operated for two years under a 2003 agreement that contained an
arbitration clause. The bank provided a new agreement in 2005, entitled
“Your Deposit Account Terms and Conditions,” which did not contain an
arbitration clause. Following a dispute, the customer filed suit and the bank
moved to compel arbitration pursuant to the earlier 2003 agreement. The
court denied the motion, concluding that the later agreement was a new
account agreement and did not include an agreement to arbitrate. The court
of appeals affirmed, agreeing that the 2005 agreement controlled. It noted
that the 2005 agreement was comprehensive and did not incorporate any
other documents by reference. Since it did not require arbitration, the court
found no agreement to arbitrate.
The Eleventh Circuit Court of Appeals reached a similar result in
Dasher v. RBC Bank(USA), 745 F.3d 1111 (11th Cir. 2014), finding that a
later version of a deposit agreement, which was expressly contemplated
under a former agreement, superseded all prior versions. The effect of that
holding was to render the prior agreement’s arbitration clause ineffective,
“even if the superseding agreement is silent on arbitration.” Id. at 1122.
The trial court herein reviewed the agreements at issue and
determined that the parties expressly intended that the March 2010
Agreement control. For the reasons that follow, we agree. The 2008
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Agreement is entitled KNTB Deposit and Electronic Banking Services
Agreement and Disclosure Booklet and purports to cover National Penn
affiliates, including KNBT, and subsidiaries, all of which are listed in the
agreement. Id. at 5. The Agreement does not reference any particular
account and speaks generally about many types of accounts, including but
not limited to, joint accounts, and power of attorney, custodial, fiduciary,
and corporate accounts. The 2008 Agreement provides that
This account is subject to charges, interest rates, and
minimum balance requirements established from time to time by
us. We may change such applicable charges interest rates, and
minimum balance requirements, and any other account terms,
features, or conditions, at any time after such notice, if any, as
is required by law.
2008 Agreement at 9. Additionally, the 2008 Agreement contains an
agreement to arbitrate all disputes under the Code of Procedure of the
National Arbitration Forum (NAF), and provides that it is governed by the
Federal Arbitration Act, 9 U.S.C. §§ 1-16. Id. at 12.
Similarly, the 2010 Agreement is a form that is not account-specific.
It purports to be a National Penn agreement but identifies KNBT as an
affiliate of National Penn. 2010 Agreement at 6. It addresses the same
subject matter as the 2008 Agreement and is similarly comprehensive in its
terms. The 2010 Agreement provides that the account
is subject to charges, interest rates, and minimum balance
requirements established from time to time by us. We reserve
the right to change the terms of this Agreement or change
the terms of your account at any time. . . . . where
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applicable law permits, we can notify you of the changes by
posting a new version of this Agreement, or a Notice of Change
to Accounts, in our offices. Your continued use of the
account following the effective date of any such change
indicates your intention to be bound by this Agreement,
as amended.
2010 Agreement at 9 (emphases added). The 2010 Agreement, however,
does not contain an arbitration provision. It provides that disputes “shall be
resolved by the Bank or by litigation through a court and have a judge or
jury decide the dispute.” 2010 Agreement at 13.
National Penn concedes that “[i]f the 2010 Agreement stated that it
applied to all of Ms. Collier’s accounts, the result might be different.”
Appellant’s brief at 14. We believe the following provision does just that. In
the “Agreement to Settle Disputes” provision of the 2010 Agreement, the
parties agree that
all claims, disputes or controversies. . . . arising from or
related to your account, the account agreement, the
transactions on the account or any other account you
previously, now or may later have with us, . . . .shall be
resolved by the Bank or through litigation through a court . . .”
Id. at 12-13 (emphases added). We conclude that the plain language of the
2010 Agreement clearly indicates that it was intended to supersede the 2008
Agreement, certainly with regard to judicial resolution of disputes in lieu of
arbitration, which is the issue before us. Hence, there is no agreement to
arbitrate.
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Prior to reaching National Penn’s second issue, we must first determine
whether the issue is properly before us. As Ms. Collier correctly points out,
the statutory authority authorizing an interlocutory appeal of the denial of
arbitration is limited to that issue. She also correctly maintains that in order
to appeal the overruling of the demurrer premised on preemption, there
must be an independent basis for this Court’s jurisdiction. See Rae v.
Pennsylvania Funeral Directors Ass'n, 977 A.2d 1121, 1130 (Pa. 2009)
(noting the collateral order test must be applied independently to each
distinct legal issue over which an appellate court is asked to assert
jurisdiction pursuant to Rule 313). The trial court implicitly agreed with that
analysis as it urged us to quash the appeal from the overruling of
preliminary objections in the nature of a demurrer as interlocutory. See
F.D.P. v. Ferrara, 804 A.2d 1221 (Pa.Super. 2002). Since National Penn
did not seek trial court certification for an interlocutory appeal by
permission, Ms. Collier echoes the trial court’s position that the only possible
basis for our jurisdiction is the collateral order doctrine and that the federal
preemption issue did not meet the requirements for collateral order review
pursuant to Pa.R.A.P. 313(b).
Whether an order is appealable as a collateral order is a question of
law; as such, our standard of review is de novo and our scope of review is
plenary. Rae, supra at 1126 n.8. Moreover, where the issue presented is a
question of law as opposed to a question of fact, an appellant is entitled to
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review under the collateral order doctrine; however, if a question of fact is
presented, appellate jurisdiction does not exist. Aubrey v. Precision
Airmotive LLC, 7 A.3d 256, 262 (Pa.Super. 2010).
Pa.R.A.P. 313(b) provides that a collateral order is one (1) separable
from, and collateral to the main cause of action; (2) that involves a right
that is too important to be denied review; and (3) presents a question such
that if review were postponed until final judgment in the case, the claim
would be irreparably lost. See Vaccone v. Syken, 899 A.2d 1103, 1106
(Pa. 2006). National Penn argues that under Hassett v. Defoe, 74 A.3d
202 (Pa.Super. 2013), Pridgen v. Parker Hannifin Corp., 905 A.2d 422(Pa. 2006) (summary judgment), and Yorty v PJM Interconnection,
L.L.C., 79 A.3d 655 (Pa.Super. 2013) (summary judgment), collateral order
review here is proper.
In Hassett, the manufacturers of the generic version of Reglan,
metoclopramide, maintained that all state negligence claims were essentially
failure to warn claims pre-empted by the United States Supreme Court’s
decision in PLIVA, Inc. v. Mensing, 131 S.Ct. 2567 (2011). The Court
held therein that, under federal law, generic drug manufacturers no longer
had the ability to unilaterally change their products’ labels. Hence, the
generic manufacturers argued that, to the extent that state law required
them to provide stronger or different warnings to avoid liability, state law
conflicted with federal law and was pre-empted. The effect of preemption
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was to render generic manufacturers essentially immune from liability under
state law for failure to warn.
This Court found that the nature of the allegations of the complaint
controlled and no examination of the merits of the underlying claims or
resolution of factual disputes was necessary. Thus, the preemption issue as
phrased was sufficiently separable. Furthermore, we found the issue
implicated the Hatch-Waxman Act’s policy of promoting access to low-cost
generic drug alternatives and state tort law concerns, rights too important to
deny review. Moreover, more than two thousand cases involving the issue
were pending at the time in Philadelphia County and we were cognizant of
the defense costs that generic drug manufacturers would incur. Thus, the
test was satisfied for application of the collateral order jurisdiction.
Pridgen involved an appeal from the denial of summary judgment in a
products liability action. The defense maintained that the eighteen-year
statute of repose in the General Aviation Revitalization Act of 1994, 49
U.S.C. § 40101, barred the action. The parties had engaged in discovery,
the relevant facts were agreed upon, and the legal issue was determinative
of whether the defendant was immune from suit. The Supreme Court found
initially that the central question, as framed, was consistent with application
of the collateral order doctrine to a summary judgment order based on a
legal rather than factual determination. Pridgen, supra at 432.
Furthermore, it met the three-pronged test for application of the collateral
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order doctrine. The application of the statutory provision to manufacturers
like the defendant was “conceptually and factually distinct from the merits”
of the underlying products claim. Id. at 433. Our High Court conceded that
while the claim was not “fully on par with immunities and constitutional
entitlements,” the federal interests underpinning the statute were
“sufficiently important to justify the intervention of appellate courts in
product liability cases in furtherance of the policy of cost control.” Id. With
regard to the irreparable loss prong, the Court found that the substantial
cost of defending the complex litigation at trial was sufficient.
In Yorty, we found no factual dispute. The issue was a legal one:
whether a federal tariff operated to provide immunity from negligence. We
found the issue, which involved a preemption analysis, to be factually
distinct from the proof of the elements of negligence in the underlying
action, as was the statute of repose in Pridgen. The immunity claim was of
paramount importance in the regulation and cost of electricity. Finally, the
cost of defending such complex litigation at a trial was the type of
irreparable loss recognized in Pridgen.
Ms. Collier relies upon our decisions in In re Reglan Litigation, 72
A.3d 696 (Pa.Super. 2013), and Goldstein v. Depository Trust Co., 717
A.2d 1063 (Pa.Super. 1998), in support of her position that the preemption
issue is not separable from and collateral to the underlying case. Goldstein
was a class action by shareholders against a securities depository for breach
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of fiduciary duty, negligence, contractual liability for third party beneficiaries,
and related claims. When the trial court overruled the defendant’s
preliminary objections and denied its petition for arbitration, the defendant
appealed. On appeal, the defendant challenged not only the arbitration
ruling but sought to litigate whether the claims were preempted by federal
securities law and regulations, a defense it had subsequently asserted in
new matter. We held that the arbitration decision was an appealable
interlocutory order under Pa.R.A.P. 311 and the Uniform Arbitration Act, but
that the preemption defense, pled as new matter four months after the
petition to compel arbitration had been denied, was not properly before us.
Goldstein, however, did not address the question before us, i.e., whether
the preemption issue is reviewable as a collateral order.
In In re Reglan Litigation, 72 A.3d 696 (Pa.Super. 2013), Wyeth
filed preliminary objections seeking dismissal of all claims against it arising
after 2001 on preemption grounds. It maintained that, since it transferred
its rights as the name-brand manufacturer of Reglan to another entity in
2001, it was not liable for post-2001 claims under PLIVA, Inc. v. Mensing,
131 S.Ct. 2567 (2011) (federal law precluded generic drug manufacturers
from unilaterally changing their labels to strengthen a warning, which was
the duty imposed in state failure-to-warn cases). It premised jurisdiction of
its interlocutory appeal on the collateral order doctrine. This Court declined
to exercise collateral order jurisdiction under Pa.R.A.P. 313(b) and quashed
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Wyeth’s appeal. We found that since Wyeth retained some control over the
name-brand drug after 2001, the nature and extent of which was disputed,
this was not a case involving the application of clearly established law to a
given set of facts. Additionally, Wyeth did not meet the irreparable harm
prong of the collateral order test because it acknowledged that, regardless of
our decision, it would remain a party in the ongoing litigation due to its pre-
2001 status as a name-brand manufacturer.
Here, as in In re Reglan Litigation, there are unresolved factual
issues. Furthermore, we do not view Ms. Collier’s claim as a challenge to
National Penn’s power to regulate and control its deposits, but rather as a
contractual issue. In asserting collateral order jurisdiction over its
preemption claim, National Penn relies upon cases involving immunity
defenses or instances when federal preemption would render a defendant
essentially immune from liability. Glaringly absent herein is any suggestion
that application of federal law would render National Penn immune from
liability premised on violations of state contract and tort law. Quite the
contrary, National Penn’s contention that it is “subject to state law only
insofar as the NBA [National Bank Act] and OCC [Office of the Comptroller of
the Currency] regulations expressly direct that result,” Appellant’s Reply
Brief at 22, implies that the NBA and OCC were not intended to pre-empt the
entire field. Thus, preemption would necessarily have to be based on some
type of conflict between federal and state law. See Hassett, supra
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(involving impossibility preemption, the type of implied conflict preemption
that arises when it is impossible to comply with both federal and state law) .
Since the case is only at the preliminary objection stage, the record is not
sufficiently developed to permit us to discern whether there is any conflict
between federal and state law. See Rae, supra (recognizing that piecemeal
review undermines judicial accuracy as courts are more likely to correctly
decide a question on a fully developed record).
While the preemption issue is arguably separable from the underlying
merits, National Penn has not satisfied the second two prongs of the
collateral order test. This case does not involve state regulation of federal
banks or a challenge to federal banking regulations. The fundamental issue
is one of contract interpretation, and we see no compelling public policy
concerns that that are too important to be denied review at this preliminary
stage of the proceedings. Nor do we find that the prospect of defending a
class action alone constitutes the type of irreparable loss required for the
third prong. Presumably, National Penn could revisit the preemption issue at
the summary judgment stage and certainly following final judgment.
The order overruling preliminary objections in the nature of a petition
to compel arbitration is affirmed. Having concluded that we have no
jurisdiction to review the trial court’s order overruling the demurrer based on
federal preemption, the appeal from that portion of the trial court’s order is
quashed.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/24/2015
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