Armstrong World Ind v. Travelers Indemnity Co etal , 115 A.3d 342 ( 2015 )

J-A34043-14
2015 PA Super 109ARMSTRONG WORLD INDUSTRIES, INC. IN THE SUPERIOR COURT OF
PENNSYLVANIA
v.
TRAVELERS INDEMNITY COMPANY,
TRAVELERS CASUALTY AND SURETY
COMPANY, AND CENTURY INDEMNITY
COMPANY
APPEAL OF: TRAVELERS INDEMNITY
COMPANY AND TRAVELERS CASUALTY
AND SURETY COMPANY
No. 157 MDA 2014
Appeal from the Order entered December 30, 2013
In the Court of Common Pleas of Lancaster County
Civil Division at No: CI-12-06271
BEFORE: FORD ELLIOTT, P.J.E., SHOGAN, and STABILE, JJ.
OPINION BY STABILE, J.: FILED MAY 06, 2015
Appellants/defendants Travelers Indemnity Company and Travelers
Casualty and Surety Company appeal from the December 30, 2013 order of
the Court of Common Pleas of Lancaster County (trial court), which
overruled Appellants’ preliminary objections in favor of Appellee/plaintiff
Armstrong World Industries, Inc. Upon careful review, we quash this appeal
as interlocutory.
This case was initiated by Appellants’ denial of insurance coverage to
Appellee for environmental damage allegedly caused by the release of
J-A34043-14
polychlorinated biphenyls (PCBs) to the site of Appellee’s manufacturing
facility in Macon, Georgia (Macon Site). In denying coverage, Appellants
reasoned that Appellee had released the environmental claim at issue under
a settlement agreement executed by the parties on May 20, 1998
(Settlement Agreement).
On June 20, 2012, Appellee filed a complaint against Appellants,1
alleging breach of contract and bad faith under Section 8371 of the Judicial
Code, 42 Pa.C.S.A. § 8371, and seeking declaratory relief. Specifically, with
respect to the declaratory relief, Appellee sought a declaration that
Appellants are bound by certain insurance policies by which they allegedly
agreed to pay or indemnify Appellee for environmental damage related to
the Macon Site.2 See Complaint, 6/20/12, ¶ 2, 25. Appellee also sought a
declaration that, under the insurance policies, Appellants are obligated to
defend or pay Appellee’s defense costs in connection with liability related to
the Macon Site. See id. at ¶ 34.
____________________________________________
1
The complaint also listed Century Indemnity Company (Century) as a
defendant, but it is not a party to this appeal. Our review of the docket
indicates that Century filed separate preliminary objections to the complaint,
which the trial court ultimately overruled.
2
Appellee alleged that the United States Environmental Protection Agency
(EPA) identified the Macon Site as an alleged source of release of PCBs and
as a result, required Appellee “to investigate and potentially remediate” any
environmental damage caused by the release. Complaint, 6/20/12, at
¶¶ 15-17.
-2-
J-A34043-14
On August 8, 2012, Appellants filed preliminary objections to the
complaint under Pa.R.C.P. No. 1028(a)(6),3 alleging that the dispute at the
heart of Appellee’s action is governed by an alternative dispute resolution
(ADR) provision of the Settlement Agreement. In support of this allegation,
Appellants argued that under the plain language of the Settlement
Agreement, the parties were required to submit the dispute at issue to the
ADR process provided for in the Settlement Agreement, which incorporated
ADR procedures from the June 19, 1985 “Agreement Concerning Asbestos-
Related Claims,” referred to by the parties as the “Wellington Agreement.”
See Preliminary Objections, 8/8/12, at ¶ 17. Additionally, Appellants argued
that, to the extent there is a dispute over the applicability, interpretation, or
performance of the Settlement Agreement, such dispute also must be
submitted to the ADR process. Id. The ADR provision of the Settlement
Agreement provides in relevant part:
To the extent any disputes arise with respect to the application,
interpretation or performance of this Agreement, the Parties
agree to resolve such disputes in accordance with the alternative
dispute resolution procedures set forth in Appendix C to the
Wellington Agreement. For purposes of the previous sentence,
“any disputes” include dispute over whether a particular matter
____________________________________________
3
Rule 1028(a)(6) provides:
Preliminary objections may be filed by any party to any pleading
and are limited to the following grounds:
....
(6) pendency of a prior action or agreement for alternative
dispute resolution.
Pa.R.C.P. No. 1028(a)(6).
-3-
J-A34043-14
is subject to alternative dispute resolution pursuant to this
[Settlement Agreement].
Settlement Agreement, 5/20/98, at ¶ 11.1. As noted, the ADR provision of
the Settlement Agreement incorporated ADR procedures from the Wellington
Agreement. Specifically, Appendix C to the Wellington Agreement provides
for a range of ADR methods, from negotiation to binding or non-binding
arbitration. As explained in the introductory paragraph of Appendix C:
Alternative Dispute Resolution (“ADR”) is the method for
resolving disputed issues as provided in the [Wellington]
Agreement. ADR involves three basic stages: 1) good-faith
negotiation; 2) a proceeding concluding with a binding decision if
litigation is not allowed and a non-binding decision if litigation is
allowed (the “Proceeding”); and 3) an appellate process for the
binding decision.
At the negotiation stage, a person (the “Neutral”) will be
selected who will be empowered to employ a full range of
informal, mediational techniques with Principals[4] present. After
the Proceeding there will be a final settlement conference with
the Judge and/or the Neutral as a last attempt to reach a Party-
fashioned solution. This is to be followed by a binding decision
or litigation if litigation is allowed. The binding decision may be
appealed to a panel of three Judges.
Appendix C to the Wellington Agreement, 6/19/85.
On August 29, 2012, Appellee filed an “Answer” in response to
Appellants’ preliminary objections, denying Appellants’ allegations and
raising “New Matter,” in which Appellee averred the instant environmental
claim related to the Macon Site was not subject to the Settlement
Agreement. In particular, Appellee averred that the Settlement Agreement
____________________________________________
4
Appendix C to the Wellington Agreement defines Principal as “[a]n
individual with settling authority” for a party to the Wellington Agreement.
Appendix C to the Wellington Agreement, 6/19/85, at 28.
-4-
J-A34043-14
released only sites that were designated as “Known Environmental Sites.”5
Answer and New Matter, 8/29/12, at ¶ 20. Appellee further alleged that
Attachment C to the Settlement Agreement contained a list of all “Known
Environmental Sites and that Appellee “represented and warranted in the
Settlement Agreement that the sites listed in Attachment C . . . were the
only Known Environmental Sites of which it was aware as of the date of the
Settlement Agreement.” Id. Appellee finally alleged that the Macon Site
was not designated as a Known Environmental Site in the Settlement
Agreement. See id. at ¶ 21.
On December 30, 2013, the trial court issued an opinion and order,
overruling Appellants’ preliminary objections. The trial court first
determined that, based on Appellants’ failure to offer any “evidence showing
that the Site was a Known Environmental Site as of the Effective Date of the
Settlement Agreement,” it could not conclude that the Macon Site was
released under the Settlement Agreement. Trial Court Opinion, 12/30/13, at
____________________________________________
5
Under the Settlement Agreement, Known Environmental Sites were defined
as “any and all sites and locations as to which [Appellee], as of the Effective
Date, has been notified in writing by any third party or has been made
aware as the result of the receipt by [Appellee] of a written environmental
audit (or its functional equivalent in writing) that [Appellee] is or may be
liable for an Environmental Claim. . . . A site or location that receives a
shipment or transfer of actual or alleged pollutants, wastes, or other
contaminants from a Known Environmental Site shall not by reason of such
pollutants, wastes, or other contaminants be a “Known Environmental Site.”
Settlement Agreement, 5/20/98, at ¶ 3.15. Effective Date was defined as
“the date on which this [Settlement] Agreement has been executed by all
Parties hereto,” i.e., May 20, 1998. Id. at ¶ 3.13.
-5-
J-A34043-14
4-5. Second, the trial court determined that the ADR provision of the
Settlement Agreement did not apply to the environmental claim at issue. In
so determining, the trial court found that the Macon Site “was not a Known
Environmental Site at the time the Settlement Agreement was entered into
by the parties.” Id. at 5. The trial court, therefore, concluded that the
applicability of the ADR provision of the Settlement Agreement could not be
decided under the ADR provision of the Settlement Agreement, but had to
be made by the trial court. Id. at 5-6.
On January 17, 2014, Appellants timely appealed to this Court. At the
trial court’s direction, Appellants filed a Pa.R.A.P. 1925(b) statement of
errors complained of on appeal, arguing:
1. The trial court erred in overruling [Appellants’] [p]reliminary
[o]bjection pursuant to [Rule 1028(a)(6)] to compel [Appellee]
to submit its claims to alternative dispute resolution under the
express and plain language of the alternative dispute resolution
clause (the “ADR Clause”) in the Agreement of Compromise,
Settlement and Release dated May 20, 1998, between
[Appellants and Appellee.]
2. The trial court erred in overruling [Appellants’] [p]reliminary
[o]bjection pursuant to [Rule 1028(a)(6)] where the express
language of the ADR clause and applicable law provide that any
disagreement as to whether a particular dispute is subject to the
ADR Clause must be resolved through alternative dispute
resolution.
Rule 1925(b) Statement, 2/14/14, at ¶¶ 1-2. On March 26, 2014, the trial
court issued a one-page Pa.R.A.P. 1925(a) opinion, whereby it adopted its
December 30, 2013 opinion in support of its reasons for overruling
Appellants’ preliminary objections.
-6-
J-A34043-14
On appeal, Appellants raise the same issues they raised in their Rule
1925(b) statement. Before we may address the merits of Appellants’ issues,
we first must determine whether we have jurisdiction to entertain this
appeal, given the manner by which Appellants have come to this Court. See
LeFlar v. Gulf Creek Indus. Park No. 2, 515 A.2d 875, 879 (Pa. 1986)
(noting a court may raise the issue of subject matter jurisdiction at any
time); accord Cont’l Bank v. Andrew Bldg. Co., 648 A.2d 551, 553 (Pa.
Super. 1994).
In their brief, Appellants claim that this Court has jurisdiction over this
appeal by virtue of Pa.R.A.P. 311(a)(8) and Sections 7320(a)(1) and
7342(a) of the Uniform Arbitration Act (Act), 42 Pa.C.S.A. §§ 7320(a)(1),
and 7342(a). Appellants’ Brief at 1. We disagree.
It is well-settled that “[u]nder Pennsylvania law, an appeal may only
be taken from an interlocutory order as of right (Pa.R.A.P. 311), from a final
order (Pa.R.A.P. 341), from a collateral order (Pa.R.A.P. 313), or from any
interlocutory order by permission (Pa.R.A.P. 31[2], [Pa.R.A.P.] 1311, 42
Pa.C.S.A. § 702(b)).” Cont’l Bank, 648 A.2d at 553. Appellants here argue
jurisdiction only on the basis of Rule 311, which enumerates several
categories of interlocutory orders that are appealable as of right. Specifically
at issue here is Rule 311(a)(8), which provides:
(a) General rule. An appeal may be taken as of right and
without reference to Pa.R.A.P. 341(c) from:
....
(8) Other cases. An order which is made appealable by
statute or general rule.
-7-
J-A34043-14
Pa.R.A.P. 311(a)(8) (emphasis added). Appellants claim only that, under
Rule 311(a)(8), the order sub judice is rendered appealable by Sections
7320(a)(1) and 7342(a) of the Act. Section 7320(a)(1) of the Act provides
that “[a]n appeal may be taken from . . . [a] court order denying an
application to compel arbitration made under section 7304 (relating to
proceedings to compel or stay arbitration).” 42 Pa.C.S.A. § 7320(a)(1).
Section 7342(a), relating to common law arbitration, provides, inter alia,
that Section 7320(a) of the Act, except subsection (a)(4), is applicable also
to common law arbitration. See 42 Pa.C.S.A. § 7342(a). In support of their
claim, Appellants rely on arbitration cases where we have held that appellate
review of a trial court’s order denying a motion to compel arbitration is
permissible under Rule 311(a)(8). See, e.g., Midomo Co., Inc. v.
Presbyterian Hous. Dev. Co., 739 A.2d 180, 184 (Pa. Super. 1999)
(“While an order denying preliminary objections is generally not appealable,
there exists a narrow exception to this oft-stated rule for cases in which the
appeal is taken from an order denying a petition to compel arbitration.”).
To render an order overruling preliminary objections seeking to compel
arbitration appealable under the Act, a party must prove that the dispute is
bound by an arbitration agreement, which calls for either statutory or
common law arbitration. Unless an arbitration agreement expressly provides
for statutory arbitration, the law presumes that the parties intended to
submit their disputes to common law arbitration. See Derry Twp. Mun.
Auth. v. Solomon & Davis, Inc., 539 A.2d 405, 410 (Pa. Super. 1988)
-8-
J-A34043-14
(“Because the arbitration provision contained in Derry’s contracts with
Solomon does not expressly provide for statutory arbitration, the agreement
does not overcome the presumption that the controversy will be governed
by the rules pertaining to common law arbitration.”). Indeed, Section 7302
of the Act provides:
An agreement to arbitrate a controversy on a nonjudicial
basis shall be conclusively presumed to be an agreement to
arbitrate pursuant to Subchapter B (relating to common law
arbitration) unless the agreement to arbitrate is in writing and
expressly provides for arbitration pursuant to this subchapter
or any other similar statute, in which case the arbitration shall
be governed by this subchapter.
42 Pa.C.S.A. 7302 (emphasis added).
With these principles in mind, the instant case is distinguishable from
our decision in Midomo because the Settlement Agreement here contains an
ADR provision. As stated earlier, Appellants rely on the ADR provision of
the Settlement Agreement to compel Appellee to submit its environmental
claim related to the Macon Site to the ADR process in accordance with the
ADR procedures outlined in the Wellington Agreement. As Appellee points
out, however, “ADR is not synonymous with arbitration.” Appellee’s Brief at
11. We agree. ADR is defined as “[a] procedure for settling a dispute by
means other than litigation, such as arbitration or mediation.” BLACK’S LAW
DICTIONARY (9th ed. 2009). Thus, “‘ADR can be defined as encompassing all
legally permitted processes of dispute resolution other than litigation.’” Id.(citing Stephen J. Ware, Alternative Dispute Resolution § 1.5, at 5-6
(2001)).
-9-
J-A34043-14
Here, the Settlement Agreement subjects disputes (including disputes
over the applicability of the Settlement Agreement) to the ADR procedures
provided for in Appendix C to the Wellington Agreement. Those ADR
procedures, however, based on our review of the Wellington Agreement, are
not limited to arbitration. On the contrary, as Appellants tacitly
acknowledge, the ADR procedures in the Wellington Agreement range from
negotiation to binding arbitration. See Appellants’ Brief at 5-6 (“The
Settlement Agreement contains the ADR Clause, a dispute resolution
provision that requires [Appellee] and [Appellants] to resolve any dispute
relating to the Settlement Agreement, including any disagreement over
whether a particular dispute is subject to the ADR clause, through certain
[ADR] procedures.”) (emphasis added). Appellants also do not provide
any legal authority—nor does our research yield any—for the proposition
that ADR provisions, like the one at issue here, are treated the same way as
provisions requiring only statutory or common law arbitration. We,
therefore, conclude that, under Sections 7320(a)(1) and 7342(a), Appellants
are not entitled to seek appellate review of the trial court’s interlocutory
order overruling their preliminary objections, because the ADR provision
here is not arbitration—even though it may contemplate arbitration at some
juncture.
Because Appellants fail to establish the ADR provision at issue here
constitutes an arbitration provision within the meaning of Sections
7320(a)(1) and 7342(a), we conclude they may not invoke Rule 308(a)(8)
- 10 -
J-A34043-14
to implicate the jurisdiction of this Court. Accordingly, we quash this appeal
as interlocutory.
Appeal quashed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/6/2015
- 11 -