IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

INTERDIGITAL COMMUNICATIONS, : CIVIL ACTION

CORP., ET AL., :

:

Plaintiffs, : NO. 03-6082

:

v. :

:

FEDERAL INSURANCE COMPANY :

:

Defendant. :

M E M O R A N D U M

EDUARDO C. ROBRENO, J. OCTOBER 3, 2005

Plaintiffs InterDigital Communications Corporation and

InterDigital Technology Corporation (collectively,

"InterDigital") brought this action against Federal Insurance

Company ("Federal") seeking a declaration that the contract in

which InterDigital agreed to reimburse Federal for litigation

expenses paid by Federal, as InterDigital’s insurer, to defend

InterDigital in its litigation with Ericsson Radio Systems and

Ericsson GE Mobile Communications, Inc. (collectively,

“Ericsson”) is unenforceable for lack of consideration.

InterDigital alleges that the “Litigation Expense and

Reimbursement Agreement” (“Reimbursement Agreement”) lacks

consideration because, at the time it entered into the

Reimbursement Agreement with Federal, Federal had a preexisting

legal duty to provide such a defense under the insurance contract

between the parties. InterDigital further contends that

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 1 of 22
InterDigital alleges that Federal breached the parties’ 1

insurance contract by refusing to reimburse InterDigital for its

attorneys’ fees above $240, and then $200 per hour (both rates

being lower than the actual rate charged by InterDigital’s

attorneys), and that Federal had no good faith basis for doing

so.

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Federal’s relinquishment of its claim to reimbursement of fees

for attorneys and litigation expenses associated with uncovered

claims is not valid consideration for the Reimbursement

Agreement. See Complaint. at ¶¶ 52-53 (doc. no. 1). 

InterDigital seeks a declaration that it is not obligated to

reimburse Federal for monies Federal paid for InterDigital’s

defense in the Ericsson litigation.

In the alternative, if the Court finds that the

Reimbursement Agreement is valid and enforceable, InterDigital

seeks a declaration that: (1) Federal is entitled to

reimbursement under the formula in the Agreement based only on

funds received from Ericsson relating to the patents at issue

(and excluding any royalty payments made to InterDigital by

entities that were not part of the litigation), and (2) that the

amount to be reimbursed under the Reimbursement Agreement is

considerably less than the amount demanded by Federal. See

Complaint. at ¶¶ 55 & 58 (doc. no. 1). 

InterDigital also seeks damages for Federal’s alleged

breach of the insurance contract and for bad faith pursuant to 42

Pa. Cons. Stat. Ann. § 8371. The Court has jurisdiction 1

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 2 of 22
 According to its terms, the Reimbursement Agreement is to 2

be construed according to Pennsylvania law. See Complaint, Ex.

E, ¶ 18 (doc. no. 1). 

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pursuant to 28 U.S.C. § 1332 because the parties are diverse and

the amount in controversy exceeds $75,000, exclusive of interests

and costs. The action for declaratory relief is authorized by 28

U.S.C. § § 2201 and 2202.

Before the Court is Federal’s motion to dismiss

InterDigital’s complaint and to compel arbitration. Federal

contends that InterDigital’s complaint should be dismissed

because, as a matter of law, the Reimbursement Agreement,

requiring the parties to arbitrate fee disputes, is enforceable

under Pennsylvania law, even if not supported by consideration. 2

Specifically, Federal argues that under Pennsylvania’s Uniform

Written Obligations Act (“UWOA”), the Reimbursement Agreement is

enforceable because (1) it contains an “additional express

statement” of the intent of the parties to be bound by the

Reimbursement Agreement, as required under the UWOA; and (2) the

exchange of promises in the Reimbursement Agreement clearly

expressed the intent of the parties to be bound. Therefore,

Federal contends that, because the agreement is binding,

regardless of whether the consideration recited in the

Reimbursement Agreement is valid, any dispute between the parties

as to the amount of the reimbursement to be paid by InterDigital

to Federal should be arbitrated pursuant to the arbitration

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 3 of 22
Because InterDigital’s breach of contract and bad faith 3

claims are undermined by the terms of the Reimbursement

Agreement, in which the parties agreed on the hourly rate that

Federal would pay for InterDigital’s counsel, and the Court finds

that the Reimbursement Agreement is valid and enforceable, Count

II (Breach of Contract) and Count III (Bad Faith in Violation of

18 Pa. Cons. Stat. Ann. § 8371) will also be dismissed. 

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clause in the Reimbursement Agreement. 

In response, Interdigital argues that the Reimbursement

Agreement is not supported by consideration and it is not covered

by the UWOA. In any event, Interdigital argues that Federal has

not complied with the terms of the Reimbursement Agreement

requiring a meeting between representatives of Interdigital and

Federal before seeking arbitration. 

For the reasons that follow, the Court concludes that,

even assuming the Reimbursement Agreement is not supported by

consideration, it is enforceable under the UWOA. Because the

parties agreed to arbitrate the remaining dispute involving the

amount that Federal should be reimbursed (if any), the Court

concludes that arbitration should be compelled on that basis.3

Additionally, the Court concludes that whether the parties

satisfied all conditions precedent to arbitration, if any, is a

procedural issue to be decided by the arbitrator.

I. FACTS

The instant dispute concerns a Commercial General

Liability Policy (the “Policy”) issued by Federal to

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 4 of 22
 Ericsson sought declaratory and monetary relief based upon 4

several causes of action, at least one of which alleged

defamation and commercial disparagement that constituted an

advertising injury under the Policy. InterDigital filed a

counterclaim alleging, inter alia, patent infringement. 

InterDigital alleges that all claims between the parties involved

the same threshold legal issue, the validity of InterDigital’s

patents.

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InterDigital, in consideration for premium paid, pursuant to

which, in relevant part, Federal was obligated: (1) to cover

damages InterDigital became obligated to pay by reason of

liability for, inter alia, personal or advertising injury, and

(2) to defend InterDigital with respect to any claim or suit

against InterDigital seeking, inter alia, damages for personal or

advertising injury. See Complaint, Ex. A (doc. no. 1). Between

September 1993 and May 2003, InterDigital was involved in

litigation with Ericsson, with respect to public statements made

by InterDigital that Ericsson was infringing on InterDigital’s

patents. While reserving its right to reimbursement for any 4

uncovered expenses, Federal acknowledged its obligation under the

policy to defend InterDigital in the Ericsson litigation.

As contemplated under the Policy, Federal reimbursed

InterDigital for its attorneys’ fees and litigation expenses

throughout the Ericsson litigation. On February 9, 2000, while

the Ericsson litigation was still ongoing, InterDigital entered

into an agreement with Federal, entitled the “Litigation Expense

and Reimbursement Agreement,” in which InterDigital promised

that, in the event of a court award or settlement in the Ericsson

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 5 of 22
 InterDigital claims that the Reimbursement Agreement was 5

precipitated by Federal’s insistence that (1) it was entitled to

seek reimbursement of fees for attorneys and litigation expenses

associated with the defense of claims that did not fall within

InterDigital’s insurance coverage for advertising injuries under

the Policy, and (2) it planned to seek reimbursement prior to

InterDigital receiving settlement proceeds or an award from

Ericsson.

 Except that Federal would only reimburse InterDigital for 6

attorneys’s fees calculated at the maximum rate of $200 per hour

for services performed after April 1, 1999. See Complaint, Ex.

E, ¶¶ 2,3 (doc. no. 1).

See Complaint, Ex. E, ¶ 6(a) (doc. no. 1). 7

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litigation, it would reimburse Federal for the litigation

expenses. 

5

The Reimbursement Agreement, in part, provides: (1)

Federal would continue to reimburse InterDigital for attorneys’

fees and other litigation expenses in the same manner as Federal

had been doing; (2) InterDigital was required to reimburse 6

Federal’s defense costs (even those paid before the agreement) by

paying Federal 9% of the first $50 million of the “agreed-upon

settlement” for the patent claims and 10% of everything above $50

million of the “agreed-upon settlement” for the patent claims in

the Ericsson litigation; and (3) if Federal does not believe it 7

will be fully reimbursed within four years from the date of the

settlement, Federal could seek additional reimbursement from

InterDigital. See Complaint, Ex. E, ¶ 6(c) (doc. no. 1). The

Reimbursement Agreement also states that the consideration for

the agreement is “the reciprocal trade off, and/or compromise of

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 6 of 22
 InterDigital reimbursed Federal, in part, for litigation 8

expenses in the amount of $157,000.

 InterDigital alleges that this meeting took place subject 9

to its express reservation that the meeting would not be part of

the procedures set forth in the Reimbursement Agreement. See

Plaintiffs’s Memorandum of Law in Opposition to Defendant’s

Motion to Dismiss, Ex. 3 (doc. no. 12).

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the parties’ respective rights which have been reserved or

asserted with regard to funding, allocation, apportionment and

reimbursement of litigation expenses with regard to the [Ericsson

litigation]” and the certainty derived from the agreement. 

Complaint, Ex. E, Recital K (doc. no. 1).

The Ericsson litigation settled. Thereafter, Federal

demanded full reimbursement in the amount $27,886,576.64, which

represented the amount Federal had paid to InterDigital toward

InterDigital’s litigation expenses. InterDigital contended that

it was not obligated to reimburse Federal for litigation expenses

claiming the Reimbursement Agreement was unenforceable for lack

of consideration. After the dispute arose, the parties met once 8

to discuss settlement of the case. There is a dispute whether

this one meeting satisfied the required meeting provided for in

the Reimbursement Agreement. Thereafter, pursuant to paragraph 9

6(c)(ii) of the Reimbursement Agreement, Federal formally

demanded arbitration of its claim for reimbursement. In turn,

InterDigital filed the instant suit. 

II. DISCUSSION

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 7 of 22
 Although not argued by the parties, whether a statement 10

that comports with the UWOA acts as a valid substitute for

consideration, making an agreement to arbitrate enforceable

regardless of consideration, presents a question of substantive

arbitrability which is an issue for the court to determine in the

first instance. See Ross Dev. Co. v. Advanced Bldg. Dev., Inc.,

803 A.2d 194, 196 (Pa. Super. Ct. 2002) (finding that whether the

parties validly agreed to arbitrate, commonly referred to as

“substantive arbitrability,” is generally a question for the

courts and not arbitrators, while resolution of procedural

questions is left to the arbitrator). “A gateway dispute about

whether the parties are bound by a given arbitration clause

raises a question of arbitrability for a court to decide.” 

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84

(2002)(citing First Options of Chicago, Inc. v. Kaplan, 514 U.S.

938, 943-946 (1995) (holding that a court should decide whether

an arbitration agreement bound parties who did not sign the

agreement)). 

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A. Standard for a Motion to Compel Arbitration

Under Pennsylvania law, the parties must submit claims

to arbitration if the parties entered into an agreement to

arbitrate and the dispute falls within the scope of the

agreement. Messa v. State Farm Ins. Co., 641 A.2d 1167, 1168

(Pa. Super. Ct. 1994); Rocca v. Pennsylvania Gen. Ins. Co., 516

A.2d 772, 773-74 (Pa. Super. Ct. 1986). Once a court determines

that a valid agreement to arbitrate exists and that the dispute

falls within the agreement, pursuant to the Pennsylvania Uniform

Arbitration Act, 42 Pa. Cons. Stat. Ann. §§ 7301-7320, the court

must compel the parties to arbitration. Messa, 641 A.2d at

1168.10

Additionally, motions to compel arbitration are

reviewed, in the first instance, under the well-settled summary

judgment standard set forth in Fed. R. Civ. P. 56(c). Bellevue

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 8 of 22
 The Court also requested supplemental briefs from both 11

parties addressing the impact of the Supreme Court’s decision in

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395

(1967), on the forum and calculus of this case. Both parties

agree, as does the Court, that in these circumstances, a Court,

and not an arbitrator, must decide whether an enforceable

arbitration agreement exists. See Sandvik AB v. Advent Int’l

Corp., 220 F.3d 99, 112 (3d Cir. 2000) (“[W]hen the very

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Drug Co. v. Advance PCS, 333 F. Supp. 2d 318, 322 (E.D. Pa.

2004). Movants must prove through “pleadings, depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, . . . that there is no genuine issue of

material fact and that [they are] entitled to judgment as a

matter of law.” Fed. R. Civ. P. 56(c). In considering a motion

to compel arbitration, the Court must consider all of the nonmoving party’s evidence and construe all reasonable inferences in

the light most favorable to the non-moving party. Bellevue Drug,

333 F. Supp. 2d at 322. 

B. Is the Reimbursement Agreement Enforceable?

Both parties have submitted briefs that discuss whether

the consideration purported to be exchanged by the Reimbursement

Agreement is adequate and whether there was any other

consideration exchanged by the parties that could support the

Reimbursement Agreement. However, the Court need not determine

those issues because it finds on the alternative basis argued by

Federal that, under the UWOA, the Reimbursement Agreement is

binding even absent consideration. 

11

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 9 of 22
existence of . . . an agreement is disputed, a district court is

correct to refuse to compel arbitration until it resolves the

threshold question of whether the arbitration agreement

exists.”); Giannone v. Ayne Inst., 290 F. Supp. 2d 553, 560-61

(E.D. Pa. 2003) (holding that an arbitrator may decide a claim

that a contract is voidable, while a court must decide whether a

contract is void ab initio). Here, InterDigital claims that the

Reimbursement Agreement is void, not merely voidable, and thus,

should be decided by the Court. Additionally, the arbitration

clause in the Reimbursement Agreement does not encompass

challenges to the validity of the agreement, as challenged here. 

Rather, the arbitration clause is limited only to determinations

as to the amount of reimbursement to Federal, if any.

 Professor Williston, the drafter of the UWOA, declared 12

that the purpose of the UWOA was to make the law “substantially

the same as it was when seals were in force, so far as the

doctrine of consideration is concerned, except that in lieu of

the formality of the seal, the formality of this statement is

substituted.” Fed. Deposit Ins. Corp. v. Barness, 484 F. Supp.

1134, 1148 (E.D. Pa. 1980)(citations omitted).

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The UWOA provides that:

A written release or promise, hereafter made

and signed by the person releasing or

promising, shall not be invalid or

unenforceable for lack of consideration, if

the writing also contains an additional

express statement, in any form of language,

that the signer intends to be legally bound.

33 P.S. § 6. Under the UWOA, a written agreement may not be 12

avoided for lack of consideration if it contains a provision

expressing the intent of the parties to be legally bound by the

agreement. See Laudig v. Laudig, 624 A.2d 651, 654 (Pa. Super.

Ct. 1993). Instead, the statement of the intent of the parties

to be legally bound acts as “a valid substitute for

consideration” for the agreement. Fedun v. Mike’s Café, Inc.,

204 A.2d 776, 781 (Pa. Super. Ct. 1964), aff’d 213 A.2d 638 (Pa.

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 10 of 22
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1965).

The requirements of the UWOA are met by “an additional

express statement, in any form of language, that the signer

intends to be bound.” 33 Pa. Cons. Stat. Ann. § 6 (emphasis

added). For example, in Yocca v. Pittsburgh Steelers Sports,

Inc., 806 A.2d 936, 945 (Pa. Commw. Ct. 2002), rev’d on other

grounds, 854 A.2d 425 (Pa. 2004), the court found that an

agreement containing the statement, “This agreement shall be

binding upon and inure to the benefit of the parties hereto and

their permitted successors and assigns,” when signed by the

parties, expressed an acknowledgment of intent to be bound. Id. 

Similarly, in Kronz v. Cech (In re Romano), 175 B.R. 585 (Bankr.

W.D. Pa. 1994), the Bankruptcy Court for the Western District of

Pennsylvania found the language, “The covenants, conditions and

agreements contained in this Mortgage shall bind, and the

benefits thereof shall inure to the respective parties hereto and

their respective heirs, executors, administrators, successors and

assigns as the case may be,” to be a clear expression of

intention to abide by the provisions of the mortgage, thereby

satisfying the requirements of the UWOA. Id. at 593. 

The provisions at issue in both Yocca and Kronz are

nearly identical to the language contained in the Reimbursement

Agreement. Section 13 of the Reimbursement Agreement signed by

InterDigital and Federal (collectively referred to as the

“Contracting Parties”) stated:

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 11 of 22
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The Contracting Parties understand and agree

that the agreements, undertakings, acts and

other things done or to be done by each of

the Contracting Parties in this Agreement

shall run to and be binding upon the

respective Contracting Parties, and their

respective successors and assigns, which with

respect to Insured [InterDigital] shall

specifically include any Successor Entity.

Complaint, Ex. E, ¶ 13 (doc. no. 1) (emphasis added). Upon

review of the clear and unambiguous language of the Agreement,

the Court concludes that the language, “this agreement shall run

and be binding upon the respective Contracting Parties,” is an

additional express statement and is the form of language that

clearly expresses an intent to be bound. See, e.g., Kay v. Kay,

334 A.2d 585, 586 n.1, 587 (Pa. 1974)(finding that the statement

in a spousal support agreement that “HUSBAND agrees to be legally

bound . . . . HUSBAND further agrees and legally binds himself 

. . . .” sufficiently stated the husband’s intention to be

legally bound under the UWOA); Morgan’s Home Equip. Corp. v.

Martucci, 136 A.2d 838, 841, 845 n.12 (Pa. 1957)(finding that an

employment agreement which contained the statement “I intend to

be legally bound hereby,” is a statement of intent to be bound

within the meaning of the UWOA and has the same effect in

importing consideration as a seal on an agreement); Fasco, A. G.

v. Modernage, Inc., 311 F. Supp. 161, 164 (W.D. Pa.

1970)(concluding that an agreement stating “[w]e the undersigned

agreed to be severally liable for the obligation of [the

defendant],” was a clear and formal expression of intention to be

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 12 of 22
 Federal further contends that, even assuming that no 13

consideration was exchanged under the Reimbursement Agreement,

the agreement is valid and enforceable pursuant to the UWOA

because it contains an exchange of promises (i.e., InterDigital’s

promise to reimburse Federal for litigation expenses if it

received a settlement from Ericsson and Federal’s promise to fund

InterDigital’s litigation even if all potentially-covered claims

were stricken from the lawsuit). See Linder v. Inhalation

Therapy Servs., Inc., 834 F.2d 306 (3d Cir. 1987)(holding that,

under the UWOA, the exchange of promises between the parties in

the written amendatory agreement expressed a clear intention to

bind both parties). Because the Court finds that the

Reimbursement is enforceable based on the parties express

statement of their intent to be bound, the Court need not

determine the applicability of Linder to the instant case.

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legally bound by the agreement, thereby satisfying the UWOA).

The cases cited by InterDigital to the contrary are

distinguishable. The language in those cases, unlike the present

case, do not contain additional language that either expressly

state or objectively manifest an intention to be bound. See

Barness 484 F. Supp. at 1147-48 (finding that the statement “the

Undersigned . . . promises to pay to the order of Centennial

Bank” was not an additional express statement within the meaning

of the statute); Gershman v. Metro. Life Ins. Co., 176 A.2d 435,

436-37 (Pa. 1962)(finding that the words “[a]pproved by” followed

by obligor’s signature did not satisfy the Act); Fedun, 204 A.2d

at 780-81 (finding that the statement “[w]e . . . release you

from all obligations under the Lease . . . and will not hold you

responsible whatsoever under the Lease . . .” did not constitute

the additional express statement required by the UWOA).13

InterDigital also contends that the UWOA is not

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 13 of 22
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applicable to a contract, such as the Reimbursement Agreement, in

which the parties bargained for consideration but the

consideration is illusory. For support, InterDigital points to

the language in In re Commonwealth Trust Co. of Pittsburgh, 54

A.2d 649, 652 (Pa. 1947), which states that, “[i]n the absence of

any evidence to the contrary, an agreement under seal imports

consideration. When, however, the agreement itself reveals the

insufficiency or lack of consideration, the rule will not be

applied to the detriment of the promisor.” Analogizing

requirements under the UWOA with agreements signed under seal,

InterDigital argues that because the Reimbursement Agreement is

not supported by any consideration, under the rule of

Commonwealth Trust, the Court should not enforce the

Reimbursement Agreement. The analogy is not on point.

Even assuming that no consideration passed under the

Reimbursement Agreement, no Pennsylvania case has extended

Commonwealth Trust to agreements enforceable under the UWOA, as

suggested by Plaintiffs. To the contrary, as discussed above,

Pennsylvania cases have emphasized that contracts containing “an

additional express statement” of the intent of the parties to be

bound are enforceable whether or not consideration exists for the

agreement. See, e.g., Kay, 334 A.2d at 587 (“Under the Uniform

Written Obligations Act . . . the absence of consideration does

not render the agreement unenforceable where [a statement of the

intent of the parties to be bound is] made part of the

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 14 of 22
 In InterDigital’s supplemental brief, it asserts that the 14

contractual language in the Reimbursement Agreement does not have

the same binding effect of the contractual language in Yocca,

even though the language is nearly identical, because the

provision in the Reimbursement Agreement is contained under the

heading “Successors and Assigns, while the provision in Yocca

fell under a heading entitled “Binding Effect.” This distinction

is without consequence. Despite the heading, the language of the

Reimbursement Agreement is clear—the provision binds not only

successors and assigns, but also is “binding upon the respective

Contracting Parties.” Moreover, Paragraph 13(a) of the

Reimbursement Agreement specifically states that headings are

insignificant: “All headings contained herein are only for

convenience and ease of reference and are not to be considered in

the construction or interpretation of any provision of this

Agreement.”

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contract.”); Laudig, 624 A.2d at 655 (finding that, because an

agreement contained a clause stating the intent of the parties to

be legally bound, the agreement “is enforceable even without

consideration under the Uniform Written Obligations Act”); Yocca,

806 A.2d at 945 (agreeing with the trial court’s finding that it

was unnecessary to determine if the additional terms of an

agreement were supported by consideration because the agreement

contained a statement binding the parties pursuant to the

UWOA).14

In any event, the holding in Commonwealth Trust is

inapplicable here because it is limited to cases involving mutual

mistake. In Commonwealth Trust, the agreement of sale at issue

was premised on a mutual mistake of fact, i.e., that the seller

(as a fiduciary) was legally obligated to accept a higher bid or

offer received prior to the Orphan’s Court’s approval of the

agreement of sale. Commonwealth Trust, 54 A.2d at 652. Because

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 15 of 22
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no such obligation existed and the seller was already legally

obligated to sell to the defendant-buyer through a previous court

order, the court found there was no consideration which supported

the terms of the agreement of sale allowing the seller to rescind

if he received a higher offer. Id. Holding that a seal will not

import consideration where it is revealed that no consideration

is present, the Pennsylvania Supreme Court reversed the lower

court’s enforcement of the agreement of sale. Id. In so

holding, the court cited Jeffers v. Babis, 155 A. 878, 878-79

(Pa. 1931), a case in which the defendant had essentially engaged

in fraud in order to obtain an agreement by the plaintiffs to pay

defendant a $3,000 commission for a sale of property after the

sale was already completed. In both cases, the court concluded

that, even though the contract was under seal, it would not

enforce the agreement because there was no consideration

involved. 

The conclusion that the court’s holding in Commonwealth

Trust is limited to cases of mutual mistake is explained by

Justice Maxey’s concurring opinion in Commonwealth Trust. There,

Justice Maxey wrote: “It is true that a seal ‘imports

consideration’ but it is equally true that it does not import

unchallengeable validity to a contract founded on a mutual

mistake.” Commonwealth Trust, 54 A.2d at 656 (emphasis added). 

Because both parties had been mistaken as to their legal

obligations at the time the agreement of sale was signed, Justice

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 16 of 22
 Interdigital also claims that the UWOA has no application 15

to any agreement in which the parties recite in the agreement the

consideration purported to be exchanged. Plaintiffs cite an Iowa

case for this proposition. See North v. Manning Trust & Sav.

Bank, 169 N.W.2d 780 (Iowa 1969). However, Manning Trust was

overruled. Hubbard Milling Co. v. Citizens State Bank, 385

N.W.2d 255, 259 (Iowa 1986) (holding that the defense of failure

of lack of consideration is not precluded from being raised

merely because the parties recited consideration in the

agreement). Additionally, the rule Plaintiff proposes has never

been applied in Pennsylvania. Therefore, the Court concludes

that the Reimbursement Agreement is enforceable under the UWOA

even though the agreement may cite consideration intended to be

exchanged. 

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Maxey found that, despite the presence of the seal, the contract

should not be enforced. Id. at 656-57; see also Thrasher v.

Rothrock, 105 A.2d 600, 604 (Pa. 1954)(affirming, per curiam, a

lower court decision concluding that the Commonwealth Trust

decision was not applicable because the contract at issue was not

founded on mutual mistake). Commonwealth Trust, thus, is not 15

helpful to Interdigital in this case.

C. Should the Parties be Compelled to Arbitrate?

InterDigital next argues that, even if the

Reimbursement Agreement is enforceable, the Court should not

compel the parties to arbitrate at this time because the parties

have not yet satisfied the meeting requirement set forth in the

Reimbursement Agreement. The Agreement provides:

If the combination of all of the foregoing is

not reasonably projected to fully reimburse

Federal within those four (4) years, Federal

may, at its option, seek additional

reimbursement from the Insureds during which

time a representative of the Insureds and

Federal, each of which having the authority

to bind their respective entities, shall

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 17 of 22
The Reimbursement Agreement states that the agreement of 16

the parties to arbitrate is governed by Pennsylvania’s Uniform

Arbitration Act, 42 Pa. Cons. Stat. Ann. §§ 7301-7320. See

Complaint, Ex. E, ¶ 6(c)(ii) (doc. no. 1).

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meet. If the Insureds and Federal cannot

agree on a resolution, the matter will be

submitted to arbitration, pursuant to

Pennsylvania’s Uniform Arbitration Act. . . . 

Complaint, Ex. E, ¶ 6(c)(ii). In other words, InterDigital

argues that, a formal meeting was contemplated by the arbitration

provision and such a meeting did not occur in this case. 

Pursuant to Pennsylvania’s Uniform Arbitration Act,16

the determination of whether a matter is subject to arbitration

is within the jurisdiction of the court. See 42 Pa. Cons. Stat.

Ann. § 7304(a); Ross, 803 A.2d at 196. In a proceeding to compel

arbitration, as a threshold matter, the court must address

whether the parties agreed to arbitrate and the scope of the

agreement between the parties. Ross, 803 A.2d at 196-97. Once

the court determines that there is an agreement to arbitrate and

that the dispute falls within the scope of the arbitration

clause, resolution of procedural questions, such as whether the

invocation of arbitration was proper or timely, is left to the

arbitrator. Id. at 196. 

In the instant case, the parties agree that under

section 6(c)(ii) of the Reimbursement Agreement, they agreed to

arbitrate disputes concerning the amount to be reimbursed to

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 18 of 22
 See Defendant’s Memorandum of Law in Support of Motion to 17

Dismiss, at p. 22 (doc. no. 5); Plaintiffs’s Memorandum of Law in

Opposition to Defendant’s Motion to Dismiss, at p. 30 (doc. no.

12).

 The agreement provides, 18

[i]f the combination of all the foregoing is

not reasonably projected to fully reimburse

Federal within those four (4) years, Federal

may, at its option, seek additional

reimbursement from the Insureds during which

time a representative of the Insureds and

Federal, each of which having the authority

to bind the respective entities, shall meet. 

If the Insureds and Federal cannot agree on a

resolution, the matter will be submitted to

arbitration, pursuant to Pennsylvania’s

Uniform Arbitration Act, before a single

arbitrator approved by Federal and the

Insureds . . . .

Complaint, Ex. E, ¶ 6(c)(ii) (doc. no. 1).

-19-

Federal by InterDigital. InterDigital has not argued that its 17

claims with respect to the amount of Federal’s reimbursement do

not fall within the scope of the agreement to arbitrate. Rather,

InterDigital argues that arbitration is not timely because the

parties have not satisfied a condition precedent that the parties

meet to resolve the dispute prior to submitting the matter to

arbitration. See Complaint, Ex. E, ¶ 6(c)(ii). 

18

Specifically, InterDigital contends that the meeting

between the parties on September 15, 2003, to discuss settlement

does not satisfy the condition precedent because InterDigital

attended the meeting under the express reservation that the

meeting was excluded from procedures required under the

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 19 of 22
Lastly, InterDigital argues that arbitration should not be 19

compelled because the Reimbursement Agreement does not state that

arbitration of the dispute is “final and binding,” and hence any

decision rendered by arbitrators would only be advisory. See

Orlando v. Interstate Container Corp., 100 F.3d 296, 300 (3d Cir.

1996)(finding that, because an arbitration award in a grievance

proceeding was not final because the arbitration clause did not

use the words “final” or “binding,” review of the merits of the

grievance by the court is proper). Even assuming that the

decision of the arbitrator in this case would not be binding

because the Reimbursement Agreement does not so state,

-20-

Reimbursement Agreement. See Plaintiffs’s Memorandum of Law in

Opposition to Defendant’s Motion to Dismiss, Ex. 2 (doc. no. 12).

Under Pennsylvania law, the procedural issue of whether

a condition precedent to arbitration has been met is for an

arbitrator to decide. See Ross, 803 A.2d at 197 (finding that

the issue of whether a defendant’s failure to satisfy the

conditions precedent in the contract, i.e., whether the claims in

a construction contract were previously presented to the

architect are determined in arbitration); see also Shaler Area

Educ. Ass’n. v. Shaler Area Sch. Dist., 433 A.2d 168, 170 (Pa.

Commw. Ct. 1981)(determining that the issue of whether the

teachers had complied with the steps required by the collective

bargaining agreement was for the arbitrator to decide).

Accordingly, given that the parties have formally

agreed to arbitrate their dispute and the dispute falls within

the scope of the arbitration agreement, the Court concludes that

the issue of whether or not the September 15, 2003 meeting

satisfied a condition precedent to arbitration is procedural and

is to be determined by the arbitrator. 

19

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 20 of 22
InterDigital cites no support for the proposition that the court

could refuse to compel arbitration on that basis. To the

contrary, under Pennsylvania’s Uniform Arbitration Act, once the

court determines that there is an agreement to arbitrate and that

the controversy falls within the scope of that agreement, the

controversy must be submitted to arbitration. 42 Pa. Cons. Stat.

Ann. § 7304(a); Santiago v. State Farm Ins. Co., 683 A.2d 1216,

1217 (Pa. Super. 1996). There is no mention in the Act that the

provision is applicable only when the arbitrator’s decision is

final. Whether or not the arbitrator’s resolution of the instant

dispute is binding arbitration or subject to judicial review at a

later date, and if so, to what degree, need not be considered by

the Court at this time.

Pursuant to Pennsylvania law, “[a]n action or proceeding, 20

allegedly involving an issue subject to arbitration, shall be

stayed if a court order to proceed with arbitration has been made

or an application for such an order has been made under this

section.” 42 Pa. Cons. Stat. Ann. 7304(d).

-21-

III. CONCLUSION

For the foregoing reasons, Federal’s motion to compel

arbitration will be granted. Federal’s motion to dismiss the

complaint will be denied, this civil action shall be stayed,

pursuant to 42 Pa. Cons. Stat. Ann. § 7304(d), and the case 20

shall be placed in suspense. An appropriate order follows. 

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 21 of 22
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

INTERDIGITAL COMMUNICATIONS, : CIVIL ACTION

CORP., ET AL., :

:

Plaintiffs, : NO. 03-6082

:

v. :

:

FEDERAL INSURANCE COMPANY :

:

Defendant. :

ORDER

AND NOW, this 3rd day of October, 2005, it is hereby

ORDERED that the defendant’s motion to dismiss the complaint and

compel arbitration (doc. no. 16) is GRANTED in part and DENIED in

part.

IT IS FURTHER ORDERED that the dispute shall be

SUBMITTED TO ARBITRATION in accordance with the terms of the

Reimbursement Agreement.

IT IS FURTHER ORDERED that the case is STAYED and is

PLACED IN SUSPENSE.

AND IT IS SO ORDERED.

 

EDUARDO C. ROBRENO, J.

Case 2:03-cv-06082-ER Document 27 Filed 10/06/05 Page 22 of 22