J-A09028-15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

THOMAS S. ETZLER, INDIVIDUALLY AND 

DERIVATIVELY ON BEHALF OF 

RECYCLING EQUIPMENT CORPORATION,

IN THE SUPERIOR COURT OF

PENNSYLVANIA

Appellant

v.

GUNTHER “BUD” ETZLER, STEPHEN P. 

ETZLER, WILMA D. ETZLER, RECYCLING 

EQUIPMENT CORP., INC.,

Appellee No. 2288 EDA 2014

Appeal from the Judgment Entered October 9, 2014

In the Court of Common Pleas of Montgomery County

Civil Division at No(s): 09-25465 and 09-26544

BEFORE: BOWES, DONOHUE and STABILE, JJ.

CONCURRING AND DISSENTING MEMORANDUM BY BOWES, J.:

FILED NOVEMBER 17, 2015

I agree with the learned majority that Thomas’s claims at Counts V 

and VI are arbitrable. I also agree with the majority that Count III, 

appointment of a custodian, is not arbitrable as the arbitration provision in 

the Buy-Sell Agreement was not intended to displace remedies available to 

minority shareholders under the corporation law generally. The appointment 

of a custodian is a remedy available under the Business Corporation Law to a 

shareholder with more than a five percent ownership interest in the 
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corporation and to whom the directors “have acted illegally, oppressively, or 

fraudulently.” See 15 Pa.C.S. § 1767(a). 

I depart from my esteemed colleagues, however, in their conclusion 

that Counts I, II, and IV are arbitrable. “The scope of arbitration is 

determined by the intention of the parties as ascertained in accordance with 

the rules governing contracts generally.” D & H Distrib. Co. v. Nat'l Union 

Fire Ins. Co., 817 A.2d 1164, 1166 (Pa.Super. 2003) (quoting Henning v. 

State Farm Mut. Automobile Ins. Co., 795 A.2d 994, 996 (Pa.Super. 

2002)). “Arbitration is a matter of contract, and parties to a contract cannot 

be compelled to arbitrate a given issue absent an agreement between them 

to arbitrate that issue.” Setlock v. Pinebrook Pers. Care & Ret. Ctr., 56 

A.3d 904, 909-910 (Pa.Super. 2012). 

Paragraph 18, “Arbitration,” provides:

Any party to this Agreement shall have the right to demand that 

a controversy or claim arising out of or related to this 

Agreement, or the breach thereof, shall be settled by 

arbitration in accordance with the then current rules of the 

American Arbitration Association of Philadelphia, and judgment 

upon the award rendered by the arbitrator or arbitrators may be 

entered in any court having jurisdiction thereof. The costs of 

such arbitration shall be borne by the losing party. 

(emphasis supplied). 

I acknowledge that similarly worded arbitration clauses have been 

labeled “unlimited” and our courts have held that any claims implicating the 

contract can be compelled to arbitration, whether they sound in contract or 
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tort. See Dodds v. Pulte Home Corporation, 909 A.2d 348, 351 

(Pa.Super. 2006). However, more recently, this Court has explained that 

“[e]ven though it is now the policy of the law to favor settlement of disputes 

by arbitration and to promote the swift and orderly disposition of claims, 

arbitration agreements are to be strictly construed and such agreements 

should not be extended by implication.” Elwyn v. DeLuca, 48 A.3d 457, 

461 (Pa.Super. 2012) (citations and quotation marks omitted). For instance, 

in Setlock, supra, we refused to “make the leap” and find claims for 

wrongful death arbitrable pursuant to a residential agreement that merely 

set forth the residents’ financial obligations, finding that the dispute did not 

arise from the matters covered by the agreement. We held that “where a 

contract in no way discusses liability for a cause of action, the arbitration 

clause in the unrelated contract between the parties cannot be read so 

broadly as to encompass any and all disputes that arise between the 

parties.” Setlock, supra at 912 n.7.

The stated purpose of the Buy-Sell Agreement was to ensure that 

ownership of the closely held corporation remained in the hands of those 

engaged in the conduct of the business. To that end, the Agreement placed 

restrictions on the lifetime transfer of the stock, identified the events that 

trigger a forced sale, and specified the basis for valuation of the shares for 

purposes of a buy-out. The Agreement also established the timeline for the 

acceptance of the offer by the Corporation or the remaining shareholders, 
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the method for determining the purchase price, and the manner of 

transferring the shares. 

I do not believe that Counts I and IV, both of which involve claims of 

wrongful termination, are arbitrable simply because termination is a 

triggering event for the operation of the Buy-Sell Agreement. Count I, which 

seeks a declaration of the validity of actions taken by Gunther and Wilma as 

purported directors of the Recycling Equipment Corporation (“Corporation”), 

including their demotion of Thomas and promotion of Gunther to President, 

involves matters of corporate governance. The Buy-Sell Agreement simply 

does not address matters of corporate management. Count IV is designed 

to effect a tort recovery for the same alleged misconduct that forms the 

basis for the declaratory relief sought at Count I.1 I believe the remedy for 

wrongful termination is wholly distinct from the valuation and transfer of 

Thomas’s shares in the Corporation, which is the subject of the Agreement. 

At Count II, Thomas asserted a derivative claim for the Appellees’ 

breach of their fiduciary duties to the Corporation and its shareholders based 

on, inter alia, self-dealing and misappropriation of corporate assets. Thomas 

pled that their misconduct “significantly depleted the value of the Company 

and have set it for a course of self-destruction.” Complaint, Count II ¶61. 

____________________________________________

1 Notably, Thomas seeks monetary damages, not reinstatement, for his 

alleged wrongful termination. 
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The majority concedes that Count II states a derivative claim for breach of 

fiduciary duties owed to the Corporation. Nonetheless, it focuses on 

allegations of financial irregularities, breach of a duty to “maximize 

corporate assets,” and a duty to maintain accurate and complete financial 

records, and concludes that these averments all relate to the determination 

of the book value of the stock, and thus, are arbitrable. Majority 

Memorandum, at 13. 

I disagree with the majority’s premise that the allegation of financial 

irregularities is ipso facto a challenge to the calculation of book value. 

Furthermore, I believe Count II states a viable shareholder derivative claim 

authorized under the Business Corporation Law. A shareholder derivative 

action is an “action or proceeding brought to enforce a secondary right on 

the part of one or more shareholders of a business corporation against any 

present or former officer or director of the corporation because the 

corporation refuses to enforce rights that may properly be asserted by it.” 

15 Pa.C.S. § 1782(a); see also Pa.R.Civ.P. 1506(a). Financial irregularities, 

waste of corporate assets, alleged ultra vires acts by ostensible directors, 

and self-dealing are well-recognized grounds for seeking relief in a 

shareholder derivative action. Since the Agreement does not address or 

purport to govern such actions, I do not find the claims asserted in Count II 

arbitrable. 
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Thus, I would reverse and remand for a judicial disposition of Counts I, 

II, and IV, in addition to Count III.