Opinion ID: 3149902
Heading Depth: 3
Heading Rank: 2

Heading: Appellee

Text: Appellee counters that the Superior Court’s decisions in Stewart and herein were correctly decided because the NAF provisions “are clearly essential” to the Agreement since, by its own terms, only the NAF can administer its rules and procedures. Appellee’s Brief at 18. Appellee also claims the FAA cannot rescue the Agreement because its “lapse” provision triggers only when the arbitrator is unavailable, not the forum. Appellee further asserts that even if it were admissible, her deposition testimony has no probative value in relation to a contractual ambiguity. After reiterating the Superior Court’s reasoning in Stewart, Appellee remarks that its holding “‘is supported by a majority of decisions that have analyzed language similar to that in the Agreement.’” Id. at 24 (quotation, quotation marks, and footnote omitted).6,7 Appellee highlights that in Stewart the Superior Court rejected decisions of 6 Appellee also claims that because the Agreement was signed eight months after the NAF stopped accepting cases pursuant to the consent decree, the contract is premised on a mistake of fact and is therefore voidable. Appellee’s Brief at 31. Appellants counter that this argument is waived because “mistake of fact is an affirmative defense that must be pled with particularity, which was not done when Appellee initially opposed the preliminary objections seeking to compel arbitration.” Appellants’ Reply Brief at 8 (citing Book Metals Corp. v. Sitkin Smelting & Refining, Inc., 385 A.2d 504, 505-06 (Pa. Super. 1978)). Appellee correctly notes that “[t]his Court may affirm on any valid basis and is not limited to grounds raised by the parties.” Appellee’s Brief at 1. See, e.g., Alderwoods (Pennsylvania), Inc. v. Duquesne Light Co., 106 A.3d 27, 41 n.15 (Pa. 2014) (stating “an appellate court may affirm for any reason appearing as of record”) (citation omitted) (emphasis in original)). However, neither the issues before this Court nor the Stewart decision is premised upon mistake of fact which is a separate concern that has been briefed and argued by the parties in cursory fashion. Since we affirm the order of the Superior Court on adequate and independent bases, this issue needs no further review. [J-24-2015] - 11 jurisdictions that reached divergent conclusions including the South Dakota federal district court in Jones, which the Stewart court characterized as “‘plac[ing] undue focus on extrinsic and/or collateral evidence of the parties’ intent.’” Id. (quoting Stewart, 9 A.3d at 221). Appellee notes that the Stewart court also criticized the Jones court for “‘violat[ing] cardinal contract principles by failing to view the plain language of the Agreement as the principle evidence of the parties’ intent . . . .’” Id. (quoting Stewart, 9 A.3d at 220). Appellee emphasizes that Appellants cite to similar “cherry-picked cases from outside jurisdictions” that are incompatible with the Pennsylvania parol evidence rule. Id. at 25. Based on the Stewart court’s findings, Appellee argues that the severability clause is irrelevant since “the NAF Code specifically allows the parties to pursue their ‘legal remedies’ in court.” Id. at 27 (citing Miller v. GGNSC Atlanta, LLC, 746 S.E.2d 680, 687 (Ga. Ct. App. 2013) (finding in an analogous case that “if the NAF is unavailable, the parties are free to seek legal remedies--i.e., to file a traditional lawsuit”)). Appellee adds that beyond “espousing the FAA’s policy in favor of arbitration,” Appellants fail to show why the FAA warrants reversal. Id. at 43. Appellee asserts (Qcontinued) 7 The PAJ emphasizes that most courts have deemed Appellants’ Agreement unenforceable due to the unavailability of the NAF and its Code of Procedure. PAJ’s Brief at 23 (citing Licata v. GGNSC Maiden Dexter, LLC, 29 Mass. L. Rep. 467, 2012 WL 1414881, at  (Mass. Super. 2012) (finding the NAF integral based on “the emphatic language identifying [the] NAF and incorporating the NAF Code of Procedure,” its “very specific set of rules and procedures,” and mandate that “arbitrators must be members of [the] NAF and are the only people authorized to administer the Code”), affirmed as to other grounds, 2 N.E.3d 840 (Mass. 2014); GGNSC Tylertown, LLC v. Dillon, 87 So.3d 1063, 1066 (Miss. Ct. App. 2011) (finding “the forum in the agreement . . . is no longer available and we decline to order the lower court to pick a forum not anticipated by either party”) (internal quotations and citations omitted); Geneva-Roth, Capital, Inc. v. Edwards, 956 N.E.2d 1195, 1203 (Ind. App. 2011) (finding that “by drafting the agreement and presenting the non-negotiable terms to [the other party], [the drafter] demonstrated that it wanted to ensure that only the NAF would administer any arbitration that arose under the agreement”), cert. denied, 133 S. Ct. 650 (2012)). [J-24-2015] - 12 that despite Appellants’ claims to the contrary, they seek to give arbitration agreements greater deference than ordinary contracts. Id. at 43-44 (citing Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 404 n.12, 87 S. Ct. 1801, 1806 n.12 (1967) (noting FAA arbitration agreements are “as enforceable as other contracts, but not more so”); Salley, 925 A.2d at 118-19 (noting Congress sought to place arbitration agreements “upon the same footing as other contracts”)). Appellee also argues that the reach of Section five is limited to “[the] appoint[ment of] an alternative arbitrator, not an alternative arbitration forum” and cannot supersede the terms of the Agreement. Id. at 44 (citing In re Salomon Inc. Shareholders’ Derivative Litigation, 68 F.3d 554, 561 (2d Cir. 1995) (finding courts cannot “use [Section five] to circumvent the parties’ designation of an exclusive arbitral forum”)).8 Appellee declares Appellants’ reliance on Marmet is misplaced, emphasizing that “the Supreme Court overturned a ‘categorical rule prohibiting arbitration of a particular type of claim’ in West Virginia.” Id. at 47 (emphasis in brief) (quoting Marmet, ___ U.S. at ___, 132 S. Ct. at 1203-04). Rather, the West Virginia Supreme Court was free to determine whether “the arbitration clauses . . . are unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA.” Id. (emphasis in brief) (quoting Marmet, ___ U.S. at ___, 132 S. Ct. at 1204). Appellee 8 The AAJ notes that “[i]n cases where an arbitrator has resigned or died during the course of an arbitration, federal courts have held that [S]ection [five] of the FAA authorizes the court to fill the void by appointing a substitute arbitrator.” AAJ’s Brief at 27 (citing WellPoint, Inc. v. John Hancock Life Ins. Co., 576 F.3d 643, 647 (7th Cir. 2009) (noting that Section five “sets forth a rule that applies to the mid-stream loss of an arbitrator”)). By contrast, the AAJ underscores that Section five cannot apply where there has been a lapse in the administrator. Id. at 27-28 (citing Martinez v. Master Protection Corp., 12 Cal. Rptr. 3d 663, 675 (Cal. Ct. App. 2004) (noting under California’s analogous state arbitration law that its equivalent provision “does not permit the trial court to choose an alternative forum where the chosen forum refuses to hear the case”)). [J-24-2015] - 13 therefore asserts that Marmet “reinforces” the Superior Court’s holdings both here and in Stewart, based on “well-established ‘state common law principles’” like the parol evidence rule that do not “specifically discriminate against arbitration agreements.” Id. (emphasis in original).9 Appellee contends if this Court looks beyond the clear and unambiguous language of the Agreement, her deposition testimony cannot be used as extrinsic evidence because it lacks evidentiary value. Id. at 32. While Appellee does not contest that she signed the Agreement before reading it, she asserts that her subjective appreciation of the NAF provision is irrelevant with regard to its integrality. Appellee underscores that the contract’s terms are clear and hence dictate the intent of the parties as expressly written. Id. at 32-33 (citing Steuart v. McChesney, 444 A.2d 659, 661 (Pa. 1982) (barring ambiguity, “intent is to be discovered only from the express language of the agreement”)). Appellee notes that the Agreement states: “[A]ny disputes between the parties ‘shall be resolved exclusively through binding arbitration’ conducted ‘in accordance with the [NAF] Code of Procedure, which is hereby incorporated into this Agreement . . . .’ In turn, the NAF’s Code of Procedure provides that ‘only’ the NAF may administer its Code of Procedure.” Id. at 35 (emphasis in original) (citations omitted). Appellee therefore argues that the Agreement’s “explicit and mandatory language” and “express incorporation of the NAF Code” evince the parties’ intent to 9 In Taylor v. Extendicare Health Facilities, Inc., 113 A.3d 317 (Pa. Super. 2015), the Superior Court found Marmet and the FAA did not preempt a state law requiring the consolidation of wrongful death and survival claims. The Superior Court therefore declined to bifurcate the plaintiff’s claims against the defendant nursing care facility and compel arbitration with respect to the survival claim, which the arbitration agreement covered, based on the identical issues and the potential for inconsistent liability and duplicative damage determinations. Id. at 327. The Superior Court remarked that unlike in Marmet, “[t]he statute and rule at issue are not ‘aimed at destroying arbitration’ and do not demand ‘procedures incompatible with arbitration.’” Id. at 327-28 (quoting Concepcion, 563 U.S. at ___, 131 S. Ct. at 1747-48). [J-24-2015] - 14 arbitrate only before the NAF, making it integral regardless of the lack of express statement to that effect. Id. at 35. Conceding that no Pennsylvania court has explicitly addressed the issue, Appellee notes that many other jurisdictions have found a party’s failure to read a contract does not negate the integrality of specific terms. Id. at 34 (citing Miller v. Lykes Bros. S.S. Co., Inc., 467 F.2d 464, 466 (5th Cir. 1972) (finding a contractual provision integral regardless of the appellants’ failure to read the overarching agreement)). Appellee argues that finding otherwise would “carve out a new exception to the [p]arol [e]vidence [r]ule whereby a party claiming that a contractual term is integral must first produce extrinsic evidence of the subjective importance placed on the disputed term -- notwithstanding the non-ambiguity of the actual written term.” Id. at 37-38 (emphasis in original). See Pace Communications, Inc. v. Moonlight Design, Inc., 31 F.3d 587, 592 (7th Cir. 1994) (finding a rule “requir[ing] that parties discuss a contract’s every term in order to be bound by it . . . would reward parties for their failure to read what they sign[.]”). Appellee further asserts that if this Court finds the Agreement unclear, her testimony still cannot be admitted under the parol evidence rule because Appellants’ claim of ambiguity relates only to whether the parties agreed to arbitrate exclusively before the NAF. Appellee emphasizes that “[she] cannot say that she placed importance on any term in the agreement.” Appellee’s Brief at 41 (emphasis in original). Appellee therefore accuses Appellants of trying to “have it both ways” by “attempt[ing] to use [Appellee]’s statement that she did not read the Agreement to establish that the NAF designation is non-integral” while simultaneously “maintain[ing] that these same contractual terms demonstrate that [Appellee] clearly intended to [J-24-2015] - 15 arbitrate pursuant to the FAA.” Id. at 42.10 Instead, Appellee asserts that the contract should be construed against the drafter. Id. at 33 n.28 (citing Bucks Orthopaedic Surgery Associates, P.C. v. Ruth, 925 A.2d 868, 872 (Pa. Super. 2007) (stating “[a]rbitration agreements are contracts and should be interpreted using contract principles . . . . [W]here an ambiguity exists, courts are free to construe the ambiguity against the drafter”)).11