Saltzman, L. v. Thomas Jefferson Univ. Hospital , 166 A.3d 465 ( 2017 )

J-A31023-16
2017 Pa. Super. 206
LESLIE SALTZMAN, D.O. IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
THOMAS JEFFERSON UNIVERSITY
HOSPITALS, INC.
AND
JEFFERSON MEDICAL CARE
Appellants No. 2593 EDA 2015
Appeal from the Order Dated July 17, 2015
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): May Term, 2015, No. 00737
BEFORE: BENDER, P.J.E., MOULTON, J., and FITZGERALD, J.*
OPINION BY MOULTON, J.: FILED JUNE 30, 2017
Thomas Jefferson University Hospitals, Inc. and Jefferson Medical Care
(together, “Jefferson”) appeal from the July 17, 2015 order entered in the
Philadelphia County Court of Common Pleas overruling Jefferson’s
preliminary objections to the complaint of Leslie Saltzman, D.O. and
ordering Jefferson to file an answer within 20 days.1 We reverse and
remand.
____________________________________________
*
Former Justice specially assigned to the Superior Court.
1
Generally, “an order [overruling] a party’s preliminary objections is
interlocutory and, thus, not appealable as of right.” Callan v. Oxford Land
Dev., Inc., 858 A.2d 1229, 1232 (Pa.Super. 2004). However, an exception
to this rule exists when a party appeals from an order denying a petition to
compel arbitration. Id.; see Pa.R.A.P. 311(a)(8); 42 Pa.C.S. § 7320(a).
(Footnote Continued Next Page)
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The trial court set forth the following facts:
[Saltzman] began working for Jefferson in August 2014
at the Myrna Brind Center for Integrative Medicine. A few
days prior to her start date, [Saltzman] signed an
employment contract with Defendant, Jefferson Medical
Care [(“JMC”)]. This employment contract contains a
portion that the parties refer to as the Physician Service
Agreement [(“Agreement”)], and it contains an arbitration
clause that reads as follows:
Dispute Resolution. In the event of any
controversy or claim between the parties hereto
arising under or related to this Agreement or an[y]
breach thereof, the parties shall confer in good
faith in an attempt to resolve the dispute
informally. If the controversy is not satisfactorily
resolved at this level, then the grieving party shall
inform the other party in writing of its intention to
pursue arbitration, such notice stating the
substance of the controversy. If the matter is not
resolved within thirty (30) days after such notice,
then the controversy shall be settled by binding
arbitration in Philadelphia, Pennsylvania in
accordance with the American Health Lawyers
Association Alternative Dispute Resolution Services
Rules of Procedure for Arbitration then in effect.
The Defendant, Thomas Jefferson University
Hospital[s], Inc. [(“TJUH”)], was not a party to the
Physician Service Agreement, and no representative signed
the Agreement on behalf of [TJUH].
[Saltzman] avers that while she was working at Myrna
Brind Center for Integrative Medicine, she learned that
[Jefferson was] engaging in wrongdoing. Specifically,
[Saltzman] avers that [Jefferson] . . . w[as] holding forth a
chiropractor, George Zabrecky, as a licensed doctor of
medicine, when he did not hold such credentials. She
_______________________
(Footnote Continued)
Therefore, the trial court’s order overruling Jefferson’s preliminary objections
seeking to compel arbitration, though interlocutory, is appealable as of right.
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avers that [Jefferson] delegated medical responsibilities to
Mr. Zabrecky despite [its] knowledge that he was not
qualified, trained, experienced, licensed or certified to
perform these duties. [Saltzman] avers that she reported
this wrongdoing on or about October 15, 2014, October
24, 2014, and October 28, 2014. [Saltzman’s]
employment was terminated on November 11, 2014.
Opinion, 7/11/16, at 1-2 (“1925(a) Op.”).
On May 8, 2015, Saltzman filed a complaint against Jefferson, alleging
claims for retaliation in violation of the Pennsylvania Whistleblower Law, 43
P.S. §§ 1421-28, and common law wrongful termination. Jefferson filed
preliminary objections, seeking to compel arbitration pursuant to the
Agreement. On July 17, 2015, the trial court overruled the preliminary
objections and ordered Jefferson to file an answer within 20 days.
In its opinion, the trial court offered three reasons for denying
Jefferson’s preliminary objections. First, the trial court stated that “[t]he
fact that [TJUH] was not a party to the Physician Service Agreement was a
critical factor” in its decision not to compel arbitration. 1925(a) Op. at 3-4.
The court explained that because TJUH “was not a party to the . . .
Agreement, [Saltzman] could not knowingly waive her right to sue [TJUH] in
a court of law when she” signed the Agreement. Id. at 3.2 Second, the trial
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2
Jefferson argues that the trial court erroneously concluded that the
arbitration provision is unenforceable as to TJUH because TJUH is not a party
to the Agreement. We agree. This Court has held that a non-signatory to
an arbitration agreement can enforce the agreement if there is an “obvious
and close nexus” between the non-signatory and either the contract itself or
the contracting parties. Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d
1085, 1097 (Pa.Super. 2015) (quoting Dodds v. Pulte Home Corp., 909
(Footnote Continued Next Page)
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court found that the “Agreement was an unconscionable contract of
adhesion” that unreasonably favored Jefferson. Id. at 4. In making this
determination, the court asserted that Jefferson failed to establish that
Saltzman read and understood the consequences of the arbitration provision
before signing the Agreement. Id. Third, the trial court concluded that
“[c]ompelling arbitration in this matter would be fundamentally incompatible
with the remedial and deterrent functions of the” Whistleblower Law, finding
that “[t]he citizens of the Commonwealth of Pennsylvania, and the public at
large, have an interest in the public resolution of” Saltzman’s claims. Id. at
5. Jefferson timely appealed to this Court.
Jefferson raises the following issues on appeal:
1. Did the Trial Court abuse its discretion and/or err as a
matter of law when it failed to consider, let alone apply,
the liberal policy favoring arbitration agreements under
the Federal Arbitration Act (“FAA”) and Pennsylvania
law and overruled Jefferson’s preliminary objections
seeking to compel arbitration, when there exists a valid
enforceable agreement to arbitrate that both JMC and
TJUH may enforce against Saltzman and when the
claims asserted by Saltzman against Jefferson fall
within the scope of the Arbitration Provision because the
claims constitute “any controversy or claim between the
parties to the [Agreement]” and “aris[e] under or
relat[e] to [the Agreement] or any breach thereof”?
_______________________
(Footnote Continued)
A.2d 348, 351 (Pa.Super. 2006)). In her brief, Saltzman concedes that
TJUH has an obvious and close nexus to JMC and would be bound by the
arbitration provision were it deemed valid and enforceable. Saltzman’s Br.
at 8 n.2. Thus, our disposition applies equally to both TJUH and JMC.
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2. Did the Trial Court abuse its discretion or err as a
matter of law in overruling Jefferson’s preliminary
objections based on the finding that the Arbitration
Provision was an unenforceable unconscionable contract
of adhesion, especially when the Trial Court:
a. did not determine both that: (i) one of the parties
lacked a meaningful choice before accepting the
terms of the provision (procedural
unconscionability); and (ii) the provision
unreasonably favors Jefferson (substantive
unconscionability);
b. improperly placed the burden on Jefferson to
present evidence disproving procedural
unconscionability when Saltzman did not initially
present such evidence, and, in the purported
absence of such evidence from Jefferson, found
the Arbitration Provision unconscionable and
unenforceable; and
c. the evidence Jefferson presented (some of which
the Trial Court erred in not considering) showed
that the Arbitration Provision was not procedurally
and/or substantively unconscionable?
3. Did the Trial Court abuse its discretion when it
overruled the preliminary objections on the basis of
public policy and/or the “nature of the claims,” when:
a. There is no basis in the Whistleblower Law to do
so (i.e., the Arbitration Provision is not in
derogation of any right Saltzman has been
provided by statute and there is no inherent
conflict between arbitration and the Whistleblower
Law’s underlying purpose);
b. The public policy on which the Trial Court relied –
the right of the public to be privy to the litigation
of Saltzman’s claims – is not sufficiently well-
defined and dominant, as the law requires, to
justify rendering the Arbitration Provision
unenforceable based on public policy;
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c. In so doing, the Trial Court created an outright
prohibition on arbitrating whistleblower claims,
which is preempted by the FAA; and
d. The strong liberal policy favoring arbitration
agreements clearly outweighs any purported
public policy upon which the Trial Court relied.
4. Did the Trial Court abuse its discretion in finding that
the [Agreement] was an “employment contract,” and
that Saltzman was “employed” by Jefferson?
Jefferson’s Br. at 3-5 (trial court answers omitted).
Our review of an order overruling preliminary objections seeking to
compel arbitration “is limited to determining whether the trial court’s
findings are supported by substantial evidence and whether the trial court
abused its discretion in denying the petition.” Callan v. Oxford Land Dev.,
Inc., 858 A.2d 1229, 1233 (Pa.Super. 2004). In making this determination,
we consider the following principles:
(1) arbitration agreements are to be strictly construed and
not extended by implication; and (2) when parties have
agreed to arbitrate in a clear and unmistakable manner,
every reasonable effort should be made to favor the
agreement unless it may be said with positive assurance
that the arbitration clause involved is not susceptible to an
interpretation that covers the asserted dispute.
Id. (quoting Highmark Inc. v. Hospital Serv. Ass'n of Northeastern
Pa., 785 A.2d 93, 98 (Pa.Super. 2001)). Whether a dispute is within the
scope of an arbitration agreement is a question of law for which our scope of
review is plenary. Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d
1085, 1095 (Pa.Super. 2015).
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Pennsylvania courts apply the liberal policy favoring arbitration
agreements embodied in the FAA. See id. As our Supreme Court recently
emphasized, courts are “obligat[ed] to consider questions of arbitrability
with a ‘healthy regard for the federal policy favoring arbitration.’” Taylor v.
Extendicare Health Facilities, Inc., 147 A.3d 490, 509 (Pa. 2016)
(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 20 (1983)), cert. denied, 137 S. Ct. 1375 (2017). “[T]he FAA binds state
courts to compel arbitration of claims subject to an arbitration agreement.”
Id. (citing 9 U.S.C. § 2).3 “This directive is mandatory, requiring parties to
proceed to arbitration on issues subject to a valid arbitration agreement,
even if a state law would otherwise exclude it from arbitration.” Id. “The
only exception to a state’s obligation to enforce an arbitration agreement is
provided by the savings clause, which permits the application of generally
applicable state contract law defenses such as fraud, duress, or
____________________________________________
3
Section 2 of the FAA provides:
A written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or
transaction, or the refusal to perform the whole or any
part thereof, or an agreement in writing to submit to
arbitration an existing controversy arising out of such a
contract, transaction, or refusal, shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.
9 U.S.C. § 2. Pennsylvania’s Uniform Arbitration Act contains almost
identical language. See 42 Pa.C.S. § 7303.
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unconscionability, to determine whether a valid contract exists.” Id.; see
also Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1426
(2017) (stating that court may invalidate arbitration agreement only “based
on ‘generally applicable contract defenses’ like fraud or unconscionability”).
When a party to an arbitration agreement seeks to compel arbitration,
our inquiry is the same whether the agreement is governed by federal or
Pennsylvania law. Provenzano, 121 A.3d at 1096. We must determine:
(1) whether a valid agreement to arbitrate exists; and (2) whether the
dispute falls within the scope of the arbitration agreement. Highmark, 785
A.2d at 98; see Pisano v. Extendicare Homes, Inc., 77 A.3d 651, 654-55
(Pa.Super. 2013). If these two requirements are satisfied, the dispute must
be submitted to arbitration. Messa v. State Farm Ins. Co., 641 A.2d
1167, 1168 (Pa.Super. 1994).
I. Whether a Valid and Enforceable Arbitration Agreement Exists
Between Saltzman and Jefferson
As noted above, the trial court concluded that the arbitration
agreement was unenforceable both because it was an unconscionable
contract of adhesion and because its enforcement would violate public
policy. Notably, in her brief, Saltzman concedes that the arbitration
provision is not an unconscionable contract of adhesion, positing that
“[w]hile the [trial court’s] outcome was correct, [its] reasoning was slightly
amiss.” Saltzman’s Br. at 9. Instead, Saltzman argues that “the arbitration
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clause is not unenforceable because it is a contract of adhesion, but because
of its unacceptable minimization of [her] right to a potential recovery.” Id.4
A. The Arbitration Clause and the Vindication of Statutory Rights
Under the Whistleblower Law, a plaintiff may be awarded the costs of
litigation, including reasonable counsel fees and witness fees. 43 P.S.
§ 1425.5 The Agreement, however, provides that “the fees and costs of the
arbitrator and related expenses of arbitration shall be borne equally by the
parties” and that “[e]ach party shall be responsible for its own attorney’s
fees and costs.” Agmt. ¶ 16. Saltzman claims that the remedies available
under the Whistleblower Law are significantly greater than those available
under the Agreement and her litigation costs would be higher in arbitration.
Thus, Saltzman contends that the arbitration clause is unenforceable
because it precludes her from effectively vindicating her statutory rights.
____________________________________________
4
Because Saltzman does not argue that the arbitration provision is an
unenforceable contract of adhesion, we need not address that issue.
5
Section 1425 of the Whistleblower Law provides:
A court, in rendering a judgment in an action brought under this
act, shall order, as the court considers appropriate,
reinstatement of the employee, the payment of back wages, full
reinstatement of fringe benefits and seniority rights, actual
damages or any combination of these remedies. A court shall
also award the complainant all or a portion of the costs of
litigation, including reasonable attorney fees and witness fees, if
the complainant prevails in the civil action.
43 P.S. § 1425.
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We disagree.
First, in its brief, Jefferson admits that Saltzman could recover the
same remedies “whether she litigates her claims in arbitration or in court.”
Jefferson’s Br. at 40. Jefferson further states that “any arbitrator would
have the authority to . . . award the same remedies Saltzman could be
awarded in a court should she prevail.” Id. at 45.
Second, the Agreement provides that the arbitration proceeding would
be governed by the American Health Lawyers Association Dispute Resolution
Service Rules of Procedure for Arbitration (“AHLA Rules”). Agmt. ¶ 16.6
Section 10 of the AHLA Rules applies to any “employment case,” which is
defined as “a dispute between an organization and an individual arising out
of . . . the course of, or the termination of an employment relationship.”
AHLA Rule 10.2.7 In an employment case subject to a mandatory arbitration
clause, the AHLA Rules provide:
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6
The Agreement states that the arbitration shall be governed by the
AHLA Rules “then in effect.” Agmt. ¶ 16. Here, the record contains a
portion of the 1991 AHLA Rules, which were revised in May 2012. See
Jefferson’s Reply Mem. of Law, 7/20/15, Ex. 2. However, we take judicial
notice of the fact that the AHLA Rules were subsequently revised, effective
April 7, 2014, which pre-dated the parties’ August 1, 2014 Agreement. See
AHLA Rules (eff. April 7, 2014), available at
https://www.healthlawyers.org/dr/SiteAssets/Lists/drsaccordion/EditForm/R
ules%20Effective%20April%207.pdf. Therefore, because the 2014 AHLA
Rules would apply to the instant arbitration, we cite the 2014 version of the
Rules above.
(Footnote Continued Next Page)
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The arbitrator must disregard any contract provision
that purports to limit the employee’s statutory rights
or remedies, including, but not limited to, any increase in
the burden of proof required to prove liability or any cap
lower than the applicable statutory cap on the recovery of
damages, attorneys’ fees, or costs.
AHLA Rule 10.5(d) (emphasis added). Moreover, with regard to fees, the
AHLA Rules state that “[r]egardless of any contract that states otherwise,
the employer will pay the arbitrator’s fees and expenses” unless the
employee volunteers to pay or the arbitrator concludes that the employee’s
claim is frivolous. AHLA Rule 10.5(a) (emphasis added). Thus, the record
does not support Saltzman’s claim that arbitration would limit her potential
remedies under the Whistleblower Law.
In any event, the “effective vindication of statutory rights exception”
to arbitration does not apply to Saltzman’s state statutory claims. The cases
on which Saltzman relies to support her argument involved federal, not
state, statutory rights. See, e.g., Paladino v. Avnet Computer Techs.,
134 F.3d 1054 (11th Cir. 1998) (involving Title VII claim); Underwood v.
Chef Fransico/Heinz, 200 F. Supp. 2d 475 (E.D. Pa. 2002) (involving Title
VII claim). Moreover, as the United States District Court for the Eastern
_______________________
(Footnote Continued)
7
In its brief, Jefferson relies on the prior version of the AHLA Rules,
which provided: “In a claim arising out of or related to employment or
termination of employment [like Saltzman’s alleged claims here], the
arbitrator may grant any applicable statutory remedies and damages
available.” Jefferson’s Br. at 40 (alteration in original) (quoting former AHLA
Rule 6.06).
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District of Pennsylvania explained in Torres v. CleanNet U.S.A., Inc., 90
F. Supp. 3d 369, 377-78 (E.D. Pa. 2015):
Recent Supreme Court cases confirm that there is
absolutely no rule that prevents arbitration when a person
cannot effectively vindicate his or her state statutory
rights. . . . Most recently, in [American Express Co. v.
Italian Colors Restaurant, 133 S. Ct. 2304, 2310–11
(2013)], the [United States] Supreme Court explained that
the effective vindication rule only applies to prevent
arbitration of a federal statute in the limited circumstance
where an arbitration agreement prohibits the assertion of a
federal statutory right and “would perhaps [apply to] filing
and administrative fees attached to arbitration that are so
high as to make access to the forum impracticable.” 133
S. Ct. at 2310-11. . . .
...
Because the effective vindication rule does not apply to
state statutes, Torres cannot prevail on his argument that
the arbitration agreement is unenforceable because it
prevents him from effectively vindicating his state
statutory rights.
Similarly, in Provenzano, this Court rejected the plaintiff’s claim that
an arbitration agreement was unenforceable because it contravened his
rights under Pennsylvania’s Wage Payment and Collection Law (“WPCL”).
121 A.3d at 1103. We explained: “Absent some type of state-law defense
that would invalidate the arbitration clause itself, we see no basis under
Pennsylvania law to disfavor an agreement to arbitrate a WPCL claim.” Id.
Nor is there support for Saltzman’s argument that arbitration would
contravene a statutory right to pursue her claims in a court of law. Section
1424(a) of the Whistleblower Law provides that a plaintiff “may bring a civil
action in a court of competent jurisdiction.” 43 P.S. § 1424(a) (emphasis
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added). In Provenzano, our Court interpreted identical language in the
WPCL and concluded that such language is “permissive, not mandatory” and,
thus, the WPCL does not give a plaintiff an “absolute right to sue in the
judicial forum” or to “exclusive judicial oversight.” 121 A.3d 1101; see
Tripp v. Renaissance Advantage Charter Sch., 2003 WL 22519433, at
*11 (E.D. Pa. 2003) (holding that use of the term “court” in section 1424(a)
of Whistleblower Law does not indicate legislature’s intent to exclude such
claims from arbitration); see also Bensinger v. Univ. of Pittsburgh Med.
Ctr., 98 A.3d 672, 677-78 (Pa.Super. 2014) (recognizing that there is no
statutory right to jury trial under Whistleblower Law).
B. The Arbitration Clause and Public Policy
Next, Jefferson contends that the trial court abused its discretion in
concluding that enforcement of the arbitration provision in this case would
violate public policy. Saltzman argues, and the trial court agreed, that
“arbitration of [her] Whistleblower claim would run afoul of the
Commonwealth’s strong public policy in favor of allowing its citizens to make
safe, informed decisions regarding medical service providers by granting
access to information regarding medical practitioners.” Saltzman’s Br. at 13.
In concluding that arbitration of Saltzman’s claims would violate public
policy, the trial court focused exclusively on the “nature” of Saltzman’s
allegations:
[Saltzman] levels very serious allegations of misconduct
against [Jefferson]. By their very nature, these
proceedings should not be shielded from public view by an
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arbitration clause. The citizens of the Commonwealth of
Pennsylvania, and the public at large, have an interest in
the public resolution of this litigation. Compelling
arbitration in this matter would be fundamentally
incompatible with the remedial and deterrent functions of
the [Whistleblower Law].
1925(a) Op. at 5. While we agree that Saltzman’s allegations against
Jefferson, if proven, could be of important public interest, we do not agree
that Saltzman’s claims are exempt from arbitration for that reason.
A court may refuse to enforce a contract that violates public policy.
Fields v. Thompson Printing Co., 363 F.3d 259, 268 (3d Cir. 2004).
“Such a public policy, however, must be well-defined and dominant, and is
to be ascertained ‘by reference to the laws and legal precedents and not
from general considerations of supposed public interests.’” Id. (quoting
W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 766 (1983)).
The Whistleblower Law is “chiefly a remedial measure intended to
enhance openness in government and compel the government’s compliance
with the law by protecting those who inform authorities of wrongdoing.”
O'Rourke v. Commonwealth of Pennsylvania, Dep’t of Corrections,
778 A.2d 1194, 1202 (Pa. 2001) (internal quotation omitted). 8 The Law “is
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8
Section 1422 of the Whistleblower Law defines an “employer” as “[a]
person supervising one or more employees, including the employee in
question; a superior of that supervisor; or an agent of a public body.” 43
P.S. § 1422. A “public body” includes any body that is created by the
Commonwealth or “funded in any amount by or through Commonwealth or
political subdivision authority or a member or employee of that body.” Id.
This Court has held that an entity that receives Medicaid funding is a “public
body” for purposes of the Whistleblower Law. Denton v. Silver Stream
(Footnote Continued Next Page)
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specifically designed to protect employees from adverse employment actions
when making a good faith report regarding an instance of wrongdoing or
waste.” Pa. Game Comm'n v. State Civ. Serv. Comm'n (Toth), 747
A.2d 887, 892 n.10 (Pa. 2000).
In her brief, Saltzman appears to advocate a blanket prohibition on the
arbitration of whistleblower claims. We can find no support for such a
prohibition in the law. It is well settled that contracting parties must
“proceed to arbitration on issues subject to a valid arbitration agreement,
even if a state law would otherwise exclude it from arbitration.” Taylor, 147
A.3d at 509; see also Kindred Nursing, 137 S. Ct. at 1426 (“The FAA . . .
preempts any state rule discriminating on its face against arbitration – for
example, a ‘law prohibit[ing] outright the arbitration of a particular type of
claim.’”). “The only exception” to a state’s obligation to enforce an
arbitration agreement is where an applicable contract defense, such as
fraud, duress, or unconscionability, is proven. Taylor, 147 A.2d at 509.
Here, however, Saltzman does not seek to invalidate the arbitration
provision based on fraud, duress, or unconscionability. See supra at 7-8.
_______________________
(Footnote Continued)
Nursing and Rehab. Ctr., 739 A.2d 571, 576 (Pa.Super. 1999) (“The plain
meaning of the language of [section 1422] makes it clear that it was
intended to apply to all agencies that receive public monies under the
administration of the Commonwealth.”). In her complaint, Saltzman averred
that Jefferson receives funds from the Commonwealth through its
participation in Pennsylvania’s Medicaid program and is, therefore, an
“employer” within the meaning of the Whistleblower Law. Compl. ¶¶ 6-8.
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In its opinion, the trial court emphasized the public’s need to be privy
to the disposition of Saltzman’s whistleblower claims because Jefferson
provides medical services to the public. 1925(a) Op. at 5. However,
litigation in a public forum is not required in order to preserve the remedial
and deterrent functions of the Whistleblower Law. If Saltzman were to
prevail on her claims – whether in arbitration or in a judicial forum –
Jefferson would suffer significant adverse legal consequences. In rejecting a
plaintiff’s contention that her Whistleblower Law claim was not subject to the
arbitration provision in her employment contract, the federal court in Tripp
explained:
[C]oncern for statutorily protected classes provides no
reason to color the lens through which the arbitration
clause is read. By agreeing to arbitrate a statutory
claim, a party does not forgo the substantive rights
afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial,
forum. It trades the procedures and opportunity for
review of the courtroom for the simplicity, informality, and
expedition of arbitration.
2003 WL 22519433, at *11 (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)) (emphasis added).
Here, by refusing to enforce the arbitration agreement based solely on
the “nature” of Saltzman’s claims, the trial court failed to apply the liberal
policy favoring arbitration under both federal and Pennsylvania law. See
Provenzano, 121 A.3d at 1101-03 (rejecting plaintiff’s argument that WPCL
outweighed policy favoring arbitration where she failed to prove legislative
intent to exclude such claims from arbitration). Our Supreme Court has
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stated: “Where the parties by contract contemplate the settlement of
disputes by arbitration, every reasonable intendment will be made in favor
of the agreement[.] The public policy of this State is to give effect to
arbitration agreements.” Capecci v. Joseph Capecci, Inc., 139 A.2d
563, 565 (Pa. 1958) (emphasis added; internal citation omitted). We agree
with Jefferson that the strong public policy favoring arbitration agreements
outweighs the general public’s purported interest in hearing the disposition
of Saltzman’s claims.9
For these reasons, we conclude that the trial court abused its
discretion in concluding that the parties’ arbitration agreement is invalid and
unenforceable.
II. Whether Saltzman’s Claims Are Within the Scope of the
Arbitration Provision
Having determined that the parties entered into a valid, enforceable
arbitration agreement, we turn next to the question whether Saltzman’s
claims fall within the scope of the arbitration provision. The trial court did
not reach this question because it concluded that the parties’ arbitration
agreement was unenforceable. However, we may consider this issue
because whether a dispute falls within the scope of an arbitration clause is a
question of law for which our scope of review is plenary. See supra at 6.
____________________________________________
9
We further note that nothing in the parties’ Agreement precludes
Saltzman from reporting Jefferson’s alleged misconduct to state regulatory
authorities or even the press.
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To determine whether a plaintiff’s claims fall within the scope of an
arbitration clause, we must consider “the factual underpinnings of the claim
rather than the legal theory alleged in the complaint.” Medtronic AVE, Inc.
v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir. 2001);
see Callan, 858 A.2d at 1233 (stating that “a claim’s substance, not its
styling, controls whether the complaining party must proceed to
arbitration”). This Court has explained:
A “broad” arbitration clause in a contract is one that is
unrestricted, contains language that encompasses all
disputes which relate to contractual obligations, and
generally includes “all claims arising from the contract
regardless of whether the claim sounds in tort or contract.”
Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1276
(Pa.Super.2004). See also Brayman Const. Corp. v.
Home Ins. Co., 319 F.3d 622, 625 (3rd Cir.2006)
(stating, “the presumption [in favor of arbitrability] is
particularly applicable where the [arbitration] clause is . . .
broad”). Thus, where the arbitration provision is a
broad one, and “[i]n the absence of any express
provision excluding a particular grievance from
arbitration, . . . only the most forceful evidence of a
purpose to exclude the claim from arbitration can
prevail.”
Provenzano, 121 A.3d at 1096 (quoting E.M. Diagnostic Sys., Inc. v.
Local 169, 812 F.2d 91, 95 (3d Cir. 1987)) (emphasis added; alterations in
original).
Here, the Agreement states that the arbitration provision applies to
“any controversy or claim between the parties hereto arising under or
related to this Agreement or any breach thereof.” Agmt. ¶ 16. Jefferson
asserts that this broad language encompasses all claims relating to or
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arising from the parties’ contractual relationship, not just claims arising from
an alleged breach of the Agreement. We agree.
In Tripp, the United States District Court for the Eastern District of
Pennsylvania considered whether the plaintiff’s Whistleblower Law claims fell
within the scope of an arbitration clause in her employment contract, which
provided that “[a]ll disputes arising out of or concerning this Agreement”
were subject to binding arbitration. 2003 WL 22519433, at *3. The court
concluded that the Whistleblower Law claims were subject to arbitration
because they necessarily “concern[ed the plaintiff’s] employment” and there
was “no evidence that the Pennsylvania legislature intended such claims to
be resolved exclusively in the judicial forum.” Id. at *11; see also
Provenzano, 121 A.3d at 1102-03 (holding that plaintiff’s WPCL claim was
within scope of arbitration provision, where “claim arose out of the alleged
breach of the employment contract, [was] wholly dependent on the contract,
and [the plaintiff could not] make out his WPCL claim without reference to
the employment contract”).
Moreover, the United States Court of Appeals for the Third Circuit has
held that “when phrases such as ‘arising under’ and ‘arising out of’ appear in
arbitration provisions, they are normally given broad construction.”
Battaglia v. McKendry, 233 F.3d 720, 727 (3d Cir. 2000); cf. Smay, 864
A.2d at 1274 (“[W]here an arbitration clause is unrestricted, the parties to
the contract could be compelled to arbitrate any claim that implicates a
contractual obligation.”). Therefore, because the arbitration provision in this
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case states that it applies to “any” dispute “arising under or related to” the
Agreement, we conclude that it encompasses all disputes relating to the
parties’ contractual relationship.
We further reject Saltzman’s contention that because her statutory
claims sound in tort, not contract, they are not subject to arbitration.
Saltzman relies on Hazleton Area School District v. Bosak, 671 A.2d
277, 283 (Pa.Cmwlth. 1996), in which the Commonwealth Court affirmed
the denial of a motion to compel arbitration on the ground that the
arbitration clauses at issue did not encompass tort claims. The arbitration
clauses in Hazleton provided that “[c]laims, disputes or other matters in
question between the parties to this Agreement arising out of or relating to
this Agreement or breach thereof shall be subject to and decided by
arbitration” and “any dispute concerning the subject matter of this
AGREEMENT . . . between the parties hereto, . . . shall be settled in
accordance with the American Arbitration Association’s Rules and
Regulations.” Id. at 279 (quoting record).
Relying on the Pennsylvania Supreme Court’s decision in Muhlenberg
Township School District Authority v. Pennsylvania Fortunato
Construction Co., 333 A.2d 184 (Pa. 1975), the Commonwealth Court
concluded that the arbitration clauses did not manifest the parties’ intent to
arbitrate a tort claim for negligent performance of the contract. Id. at 282.
The Court reasoned that if the parties had intended to arbitrate tort claims,
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they would have included specific language demonstrating that intent. Id.
at 282-83.
This Court, however, has expressly disapproved of the Commonwealth
Court’s reasoning in Hazleton. In Smay, the defendant sought to compel
arbitration of the plaintiffs’ contract indemnification claim, but we also
addressed, in dicta, whether the underlying personal injury claim was
subject to arbitration. This Court stated:
We believe that the Hazleton Court misconstrued our
Supreme Court’s holding in Muhlenberg Township. The
arbitration clauses at issue in Muhlenberg Township
referenced tortious conduct as follows:
Should either party to this Contract suffer damage
in any manner because of any wrongful act or
neglect of the other party or of anyone employed
by him, then he shall be reimbursed by the other
party for such damages. 2. Claims under this
clause shall be . . . [] adjusted by agreement or
arbitration.
The Supreme Court concluded that the phrase “suffer
damage in any manner” in the arbitration clause was all-
inclusive and extended to the Township’s claims against
the contractor for faulty materials and workmanship.
Relying on Muhlenberg Township, the Hazleton
Court concluded that since the arbitration clause implicated
therein did not expressly and specifically include an action
in tort for negligence, the appellant’s claim for negligent
performance fell outside the scope of the agreement.
However, contrary to the Hazleton Court’s reading of
Muhlenberg Township, the Supreme Court did not
address the scope of the arbitration agreement in relation
to a tort claim. In reality, the relevant issue before the
Supreme Court was whether the agreement extended to
claims for faulty work or faulty materials. Thus, despite
our sister court’s characterization, Muhlenberg Township
does not stand for the proposition that an agreement to
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arbitrate must specifically reference tortious conduct in
order for the agreement to apply to disputes arising under
the contract which sound in tort. We are loathe to cement
the Commonwealth Court’s reasoning into our
jurisprudence.
As discussed supra, the instant arbitration clause is
written to encompass “Any controversy or Claim arising
out of or related to the Contract[,]” and by its own terms
the clause must be read broadly to include all claims
arising from the contract regardless of whether the
claim sounds in tort or contract.
Smay, 864 A.2d at 1275-76 (emphasis added; internal citation omitted;
some alterations in original). Therefore, we concluded that the underlying
negligence claim would be subject to arbitration. Id. at 1276.
Although our analysis of the tort claim in Smay was dicta, Smay’s
reasoning is consistent with prior Superior Court precedent. This Court has
consistently compelled the arbitration of tort claims arising from a
contractual relationship where the language of the arbitration clause is broad
and unlimited. See, e.g., Callan, 858 A.2d at 1234 (holding that tort claim
arising from real estate sales contract was subject to arbitration); Warwick
Twp. Water and Sewer Auth. v. Boucher & James, Inc., 851 A.2d 953,
958 (Pa.Super. 2004) (“[G]iven the broad scope of the arbitration language
which provides that arbitration is to be the preferred means to resolve all
claims arising out of or relating to the contract documents, it was improper
for the trial court to rule that the arbitration provision does not apply to the
negligence claim.”); Pittsburgh Logistics Sys., Inc. v. Prof’l Transp. and
Logistics, Inc., 803 A.2d 776, 779 (Pa.Super. 2002) (holding that tort
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action for misappropriation of trade secrets, breach of common law fiduciary
duties, and interference with contractual relationship was within the scope of
parties’ broad arbitration agreement).
Here, the arbitration provision, which applies to “any controversy or
claim between the parties hereto arising under or related to this
Agreement,” Agmt. ¶ 16, is broadly worded, and there is no evidence
demonstrating the parties’ intent to exclude tort claims arising from or
related to the Agreement. See Provenzano, 121 A.3d at 1096 (absent
express provision excluding particular dispute from arbitration, “only the
most forceful evidence of a purpose to exclude the claim from arbitration can
prevail”) (quoting E.M. Diagnostic, 812 F.2d at 95); Callan, 858 A.2d at
1233 (“[E]very reasonable effort should be made to favor [an arbitration]
agreement unless it may be said with positive assurance that the arbitration
clause involved is not susceptible to an interpretation that covers the
asserted dispute.”).
Accordingly, we conclude that the trial court abused its discretion in
overruling Jefferson’s preliminary objections seeking to compel arbitration.
Order reversed. Case remanded. Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/30/2017
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