M. O'Herron Company v. Columbia Gas ( 2021 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
M. O'HERRON COMPANY : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
COLUMBIA GAS OF PENNSYLVANIA, :
INC. :
: No. 595 WDA 2021
Appellant :
Appeal from the Order Entered April 16, 2021
In the Court of Common Pleas of Allegheny County Civil Division at
No(s): GD-21-1079
BEFORE: LAZARUS, J., MURRAY, J., and MUSMANNO, J.
MEMORANDUM BY LAZARUS, J.: FILED: DECEMBER 23, 2021
Columbia Gas of Pennsylvania, Inc. (Columbia) appeals from the order,
entered in the Court of Common Pleas of Allegheny County, overruling its
preliminary objections to the complaint filed by M. O’Herron Company
(O’Herron). Specifically, Columbia argues that the trial court erred in finding
that the parties did not have a binding agreement to arbitrate. Because the
parties’ fully integrated contract does not contain an arbitration provision, we
affirm.
By way of background, O’Herron is a Pennsylvania company that
provides contactor construction services associated with the construction of
natural gas pipelines. Columbia is a utility company headquartered in
Pennsylvania that provides natural gas services to Pennsylvania customers.
NiSource Corporate Services Company (NiSource), Columbia’s parent
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company, is a Delaware corporation with its headquarters and principal place
of business in Indiana.
On September 1, 2008, O’Herron entered into a General Services
Agreement (2008 GSA) with NiSource to govern “the terms and conditions
under which [NiSource] may purchase [w]ork from [O’Herron], which
purchases shall be evidence by the delivery by [NiSource] to [O’Herron] of
Purchase Orders.” 2008 GSA, 9/1/08, at 1. The GSA contains an arbitration
clause specifying that:
In the event that any Controversy arising out of or relating to this
Agreement is not resolved in accordance with the [step
negotiation] procedures[,] such Controversy shall be submitted to
mediation to mutually agreeable mediators from the American
Arbitration Association. . . . [If] the mediation process has not
resolved the Controversy within thirty days of the submission of
the matter to mediation[,] or a longer time if agreed to by the
parties, all Controversies will be decided by arbitration by the
American Arbitration Association or by a mutually agreed upon
arbitrator. The arbitration shall be administered at the arbitrator’s
offices closest to [NiSource]’s headquarters.
Id. at 10.
In April of 2010, O’Herron and Columbia executed a 54-page Service
Authorization agreement whereby O’Herron agreed to perform pipeline
construction work in Pittsburgh. The Service Authorization, signed by
representatives of Columbia and O’Herron, provides that:
Columbia [] hereby authorizes [O’Herron] to perform and
[O’Herron] agrees to perform the below indicated services
pursuant to the terms and conditions set forth and agreed
to in the NISOURCE CORPORATE SERVICES COMPANY
GENERAL SERVICES AGREEMENT FOR
CONSTRUCTION, MAINTENANCE, SERVICES AND
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MATERIALS (“AGREEMENT”) dated September 1, 2008
(Contract No. R3NI-R4NNI-023).
Service Authorization, 4/19/10, at 1 (emphasis in original). The Service
Authorization references the 2008 GSA throughout the attached exhibits.1
Page two of the Service Authorization, however, contains an integration clause
which specifies that: “This [Service Authorization] signed by [Columbia]
and [O’Herron], including any Exhibits attached hereto, constitute the
only contract or agreement between the parties for this project, [and]
represent the entire and complete agreement.” Id. at 2 (emphasis
added); see also id. at 3 (“Exhibits are attached hereto and incorporated by
reference herein.”). Page four of the Service Authorization lists the exhibits
that are attached to the contract “and/or incorporated by reference;” the 2008
GSA is neither listed nor attached as an exhibit.2 See id. at 4. O’Herron
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1 See Service Authorization Exhibit B1, at 10 (“Each potential NiSource
Contractor who will submit any bid to NiSource to perform [Department of
Transportation] related ‘Covered Functions’ . . . must have an approved DOT
Drug & Alcohol Program. . . . NiSource . . . designated National Compliance
Management Service, Inc.”); id. at 17 (“Contractor shall certify that all
employees of its approved Subcontractors performing work on any NiSource
facility are in compliance with these regulations prior to the performance of
work.”); id. at 19 (“Contractors shall . . . provide proof of insurance . . . [and]
name NiSource Inc. [] as the Additional Insured. . . . All other terms and
conditions of the NiSource General Services Agreement previously agreed to
between the Contractor and Owner will remain in the same and shall govern
all work performed by the Contractor.”).
2The attached exhibits include: Exhibit A- Scope of Work; Exhibits B1-3,
General Requirements, General Construction Requirements, and CDC Specific
Construction Requirements; Exhibit C- Bid Unit Descriptions; Exhibit D- Price
Matrix; Exhibit E- Corporate Environmental Standards; Exhibit F-Document
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completed the project contemplated in accordance with the Service
Authorization that same year.
Approximately 10 years later, in April 2020, Columbia first became
aware of alleged serious defects in the project, which it claims were previously
unrecognizable. On December 21, 2020, Columbia filed an arbitration action
against Columbia in the state of Indiana, naming NiSource as an additional
claimant on the Demand to Arbitrate.3
In February 2021, O’Herron filed, in Allegheny County, a Complaint for
Declaratory Judgment and Equitable Relief, followed by a Motion for Stay of
Arbitration, seeking a determination that Columbia and O’Herron do not have
an agreement to arbitrate the underlying dispute. On March 15, 2021,
Columbia filed its preliminary objections to the complaint, asserting objections
under Pa.R.C.P. 1028(a)(5)-(6)—nonjoinder of an indispensable party
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Control, Reporting, & Audit Provisions; and Exhibit G- Quality Control &
Assurance Standards. See Service Authorization, 4/19/10, at 4-54.
3 “Columbia [] maintains that this cause of action was not recognizable or
actionable until sometime after April of 2020.” Trial Court Opinion, 6/30/21,
at 2. Columbia further avers that it notified O’Herron of these defects and
that O’Herron failed to respond. Brief of Appellant, at 10. O’Herron argues
that Columbia failed to follow the procedural steps laid out in the 2008 GSA,
including providing written notice of the alleged claims, making an “affirmative
effort to schedule a meeting with [] O’Herron’s executives regarding the
claim,” providing relevant information regarding the claim, and submitting the
claim to mediation before filing its arbitration demand. Brief of Appellee, at
16. O’Herron maintains that even if this Court finds that the arbitration clause
is integrated into the Service Authorization, Columbia failed to follow any of
the required steps as laid out under that arbitration provision. Id. at 16.
Because we find that it was not integrated, these issues, as well as whether
the arbitration clause is valid and the proper venue for arbitration, are moot.
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(NiSource) and prior agreement to arbitrate, respectively. Following oral
argument, the court denied Columbia’s preliminary objections on April 16,
2021, and granted O’Herron’s motion to stay arbitration until further notice.
On May 14, 2021, Columbia filed a motion for reconsideration, and on May
17, 2021, filed a notice of appeal to this Court. On June 9, 2020, Columbia
filed its court-ordered Pa.R.A.P. 1925(b) statement of errors complained of on
appeal. On June 23, 2021, O’Herron filed its brief in opposition to Columbia’s
motion for reconsideration. On June 30, 2021, the trial court issued an opinion
in support of its April 16, 2021 order.
Instantly, Columbia raises the following issue for our review:
Whether the trial court erred as a matter of law in holding that the
parties do not have an agreement to arbitrate arising under the
Service Authorization when the master contract, the [2008 GSA],
contains an explicit arbitration agreement, and the Service
Authorization incorporates the [2008 GSA] by reference?
Brief of Appellant, at 4.
“In reviewing a trial court’s [denial] of preliminary objections, [our]
standard of review is de novo and the scope of review is plenary.” Jones v.
Bd. of Dirs. of Valor Credit Union, 169 A.3d 632, 635 (Pa. Super. 2017).
Similarly, whether an agreement to arbitrate exists and whether a writing
constitutes an integrated contract are questions of law for which our standard
is de novo and our scope plenary. See Neuhard v. Travelers Ins. Co., 831
A.2d 602, 604 (Pa. Super. 2003); Lenzi v. Hahnemann Univ., 664 A.2d
1375, 1379 (Pa. Super. 1995). “In interpreting a contract, the ultimate goal
is to ascertain and give effect to the intent of the parties as reasonably
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manifested by the language of their written agreement.” Fellerman v. PECO
Energy Co., 159 A.3d 22, 26–27 (Pa. Super. 2017). We look to what the
parties have “clearly expressed, for the law does not assume that the language
of the contract was chosen carelessly.” Meeting House Lane, Ltd. v. Melso,
628 A.2d 854, 857 (Pa. Super. 1993).
Here, the issue of whether Columbia and O’Herron have a binding
agreement to arbitrate such that the trial court erred in overruling Columbia’s
preliminary objections turns on whether the 2008 GSA was part of the Service
Authorization between the parties. Columbia argues that the 2008 GSA was
incorporated into the Service Authorization by reference on the first and fourth
pages thereof. Brief of Appellant, at 7-8; see also supra at n.1. Although
Columbia cites to general case law regarding incorporation by reference, it
does not cite any authority in which this Court or the Pennsylvania Supreme
Court ignored explicit language in an integration clause to allow parol
evidence4 to alter the terms of a contract on a theory of incorporation by
reference.
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4 Parol evidence includes oral discussions and writings regarding negotiations
that came before the parties entered into a final, binding, written contract.
Gianni v. R. Russell & Co, 126 A. 791, 792 (Pa. 1924) (“Where parties,
without any fraud or mistake, have deliberately put their engagements in
writing, the law declares the writing to be not only the best, but the only
evidence of their agreement. All preliminary negotiations, conversations and
verbal agreements are merged in and superseded by the subsequent written
contract . . . and unless fraud, accident or mistake be averred, the writing
constitutes the agreement between the parties, and its terms cannot be added
to nor subtracted from by parol evidence.”) (internal citations omitted).
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In arguing that the 2008 GSA and Service Authorization “should be
interpreted as one agreement” and “must be construed together,” Columbia
claims that Southwestern Energy Prod. Co. v. Forest Res., LLC, 83 A.3d
177 (Pa. Super. 2013), is “directly on point.” Brief of Appellant, at 18-19. We
disagree.
In Southwestern Energy, this Court concluded that a 2002 Oil & Gas
Lease, “2002 Letter Agreement,” and “2005 Letter Agreement” were to be
construed together where the documents “expressly reference and
incorporate each other” and “identif[y themselves] as amendment[s] of the
[original] agreement, not [] independent collateral agreement[s].” Id. at
188-90. In that case, on June 17, 2002, the parties executed the 2002 Letter
Agreement which provides, in relevant part that: “This letter will reduce to
writing our complete agreement regarding the [disputed mineral acres]. . . .
Lessor shall execute the [2002 Lease] attached hereto and made a part
hereof by this reference.” Id. (emphasis added). The parties attached
and executed the 2002 Lease, which stated that the “leased lands herein are
subject to [the Letter Agreement] dated June 17, 2002.” The 2005 Letter
Agreement, which “amends and restates” the 2002 Letter Agreement,
contained identical language and attached the 2002 Letter Agreement as
an exhibit. See id.; see also Matlock v. Matlock, 664 A.2d 551, 514
(Pa. Super. 1995) (holding qualified domestic relations order (QDRO) and
property settlement agreement (PSA) combine to form one agreement
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where QDRO was attached to PSA as exhibit and PSA specifically refers to
QRDO as exhibit).
The matter sub judice is readily distinguishable. In addition to the fact
that, with respect to the 2008 GSA, the Service Authorization lacks the
“incorporated by reference” language from the 2002 and 2005 Letter
Agreements in Southwestern, here, the Service Authorization contains an
integration clause specifying which additional documents are part of the
agreement, and, importantly, the 2008 GSA is not listed nor attached as
an exhibit. Cf. Southwestern Energy Prod. Co., supra.
In Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425 (Pa.
2004), the Pennsylvania Supreme Court explained that:
An integration clause which states that a writing is meant to
represent the parties’ entire agreement is [] a clear sign that
the writing is meant to be just that and thereby expresses
all of the parties’ negotiations, conversations, and
agreements made prior to its execution.
***
Once a writing is determined to be the parties’ entire
contract, the parol evidence rule applies and evidence of any
previous oral or written negotiations or agreements
involving the same subject matter as the contract is almost
always inadmissible to explain or vary the terms of the
contract.
Id. at 437-38. See also Dominic’s Inc. v. Tony’s Famous Tomato Pie
Bar and Restaurant, Inc., 214 A.3d 259, 270 (Pa. Super. 2019) (“[P]arol
evidence of prior representations is inadmissible as to a matter covered by the
written agreement with an integration clause.”).
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This dispute involves two sophisticated entities, both of which were
represented by counsel throughout their negotiations. As the trial court noted,
these negotiations resulted in a detailed 54-page Service Authorization that
lays out in exhaustive detail provisions governing “any factor the parties may
experience from bore testing to Public Relations to Environmental
Protections,” see Trial Court Opinion, 6/30/21, at 7, and, by its own terms
“represent[s] the entire and complete agreement” between the parties. See
Service Authorization, 4/19/10, at 2. The express terms of the Service
Authorization indicate that it was the intent of the parties to only integrate the
exhibits listed on page four and attached thereto, which plainly exclude the
2008 GSA. Therefore, we hold that the parties are not bound by the
arbitration clause of the 2008 GSA, and the trial court correctly overruled
Columbia’s preliminary objections and granted the O’Herron’s motion for stay
of arbitration.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/23/2021
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