Opinion ID: 3149902
Heading Depth: 3
Heading Rank: 1

Heading: Appellants

Text: Appellants argue that the NAF provision is an ancillary and severable code of procedure based upon the plain text of the Agreement, terms and policy guidelines of the Federal Arbitration Act (“FAA”), and admissions of Appellee. Appellants emphasize that the Agreement’s scope broadly favors arbitration, wherein the NAF cannot have been integral because it is “mentioned only once.” Appellants’ Brief at 26. Appellants claim that “[w]hat the Agreement’s language does reflect is that its primary and overriding purpose is that disputes be arbitrated, period.” Id. at 27 (citing Meskill v. GGNSC Stillwater Greeley LLC, 862 F. Supp. 2d 966, 975-76 (D. Minn. 2012) (permitting the appointment of a substitute arbitrator under the FAA pursuant to a similar agreement)). Appellants contend while the Agreement selects a set of procedural rules, it lacks “an express statement designating a specific arbitrator.” Id. at 34. Appellants note that although the Superior Court in Stewart found, as fundamental terms, “(1) that the law governing the arbitration proceedings would be the NAF code, and (2) . . . under the NAF Code, the arbitrators would be members of the NAF,” subsequent decisions in other jurisdictions indicate this is incorrect. Id. (quoting Stewart, 9 A.3d at 220). Appellants therefore argue that merely agreeing to a forum’s code of procedure does not make the 3 Arguments of Amici will be discussed to the extent they are non-duplicative of the parties’ arguments and relevant to the issues on which this Court granted allocatur. See Holt v. 2011 Legislative Reapportionment Com’n, 67 A.3d 1211, 1225 n.12 (Pa. 2013) (holding amicus briefs raising issues not implicated by the parties warrant no consideration). [J-24-2015] - 5 participation of the forum itself essential. Id. (citing Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787, 789 (7th Cir. 2013) (finding “the [arbitration] agreement calls for use of the [NAF’s] Code of Procedure, not for the [NAF] itself to conduct the proceedings”)). Appellants assert the Stewart court altered the Code’s specification in Rule 1(A) that it “shall be administered solely by the NAF” into a provision that “only [the] NAF was ‘authorized to administ[er] and apply the NAF Code.’” Id. at 35 (emphasis in original). Appellants assert that the NAF Code “provides at the very beginning that the parties are always free to agree to other procedures beyond those contained [here]” and simply directs the parties to “select an arbitrator or panel of arbitrators ‘on mutually agreeable terms.’” Appellants’ Reply Brief at 13 (citing NAF Code Rule 21(A)(1)). Appellants argue that these rules can be administered by any competent arbitrator and that their exclusivity provision is “unenforceable in light of the [NAF’s] decision to cease conducting arbitrations.” Id. at 16 (quotation and internal quotation marks omitted). Appellants claim Appellee distorts and misapplies other NAF Code Rules. For example, Appellants maintain that contrary to Appellee’s claim that Rule 48(E) governs unavailability, it “merely allows [the] NAF to turn down arbitrations not properly before that body . . . . [and] goes on to say that if the parties are ‘denied the opportunity to arbitrate a dispute, controversy or Claim before the [NAF], the Parties may seek legal and other remedies in accord with applicable law.’” Id. at 17. Appellants also dispute the ensuing implication that arbitration is no longer an option, noting that in Green, the Seventh Circuit Court of Appeals found that Section five of the FAA fits within the Code’s definition of “applicable law.” Id. at 18 (citation omitted). Appellants accordingly favor the South Dakota Supreme Court’s interpretation of the NAF Code in an analogous case, where it explicitly rejected Stewart and found the [J-24-2015] - 6 agreement neither selected a particular adjudicator, specified qualifications or experience, nor chose the NAF as its place of forum. Wright v. GGNSC Holdings LLC, 808 N.W.2d 114, 119-20 & n.6 (S.D. 2011). Appellants emphasize that “the NAF[ ] . . . does not employ its own arbitrators and merely provides a code of procedure to be followed by neutral arbitrators who may also provide arbitration for numerous other forums.” Appellants’ Brief at 36. Appellants also underscore the Agreement’s severability clause, which “indicates that the intention was not to make the [NAF] integral, [but] rather only to have a dispute resolution process through arbitration.” Appellants’ Reply Brief at 3 (quoting Jones v. GGNSC Pierre LLC, 684 F. Supp. 2d 1161, 1167 (D.S.D. 2010)). Appellants claim that by denying the “strong evidence that the overriding intent of the parties . . . was to have covered disputes arbitrated, . . . and that the identity of the arbitral forum, administrator and rules of application are secondary concerns[,]” Appellee reduces the severability clause into mere surplusage. Id. at 3 (citations omitted). See Lesko v. Frankford Hospital-Bucks County, 15 A.3d 337, 342 (Pa. 2011) (stating courts “will not interpret one provision of a contract in a manner which results in another portion being annulled”) (quotation and quotation marks omitted)). Appellants also claim that Section five of the FAA, which is incorporated into the Agreement, should have been invoked to appoint a replacement arbitrator.4 Appellants 4 Section five states, in relevant part, that: [I]f for any [ ] reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein . . . . 9 U.S.C. § 5. [J-24-2015] - 7 assert that a court should only decline to appoint a substitute arbitrator and cancel the entire agreement if the choice of forum is “‘so central to the arbitration agreement that the unavailability of that arbitrator [brings] the agreement to an end[,] . . . [in which case] the parties must have unambiguously expressed their intent not to arbitrate [their disputes] in the event that the designated [arbitral] forum is unavailable.’” Appellants’ Brief at 39 (emphasis omitted) (quoting Khan v. Dell, Inc., 669 F.3d 350, 354 (3d Cir. 2012) (quotation marks and citations omitted)).5 Appellants note that Section five has even “been used to supply particulars to an arbitration agreement where none are present.” Appellants’ Reply Brief at 11 (citation omitted). Appellants further maintain the FAA “embodies an emphatic federal policy in favor of arbitral dispute resolution” that courts have consistently supported. Appellants’ Brief at 40 (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S. Ct. 1740, 1745 (2011) (noting the FAA’s “liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary”) (citation omitted)). See Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S. Ct. 852, 861 (1984) (stating the FAA is “intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements”) (footnote omitted)). Appellants argue that Pennsylvania policy favors the underpinnings of the FAA as well. Appellants’ Brief at 41 (citing Salley v. Option One Mortgage Corp., 925 A.2d 115, 118-19 (Pa. 2007) (acknowledging the FAA’s “relevance” in arbitration agreements)). Appellants therefore claim that Stewart “runs afoul” of the Supremacy Clause by failing to “address the unique significance of the FAA.” Id. In addition, Appellants stress that in Marmet Health Care 5 Appellants note that the Stewart court relied on language contained in Khan v. Dell, Inc., 2010 WL 3283529 (D.N.J. Aug. 18, 2010), that was reversed by the Third Circuit Court of Appeals “and held that the unavailability of the NAF did not warrant invalidating the arbitration agreement.” Appellants’ Brief at 44 (citing Khan, 669 F.3d at 356-57). [J-24-2015] - 8 Center, Inc. v. Brown, ___ U.S. ___, 132 S. Ct. 1201 (2012), the U.S. Supreme Court rebuked the West Virginia Supreme Court for finding that the FAA did not override state public policy against binding arbitration agreements pursuant to personal injury and wrongful death suits and ordered that court, on remand, to “consider whether, absent that general public policy, the arbitration clauses . . . are unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA.” Marmet, ___ U.S. at ___, 132 S. Ct. at 1204. Accordingly, Appellants claim that under the guise of “public policy concerns,” Appellee “seeks to carve out a general ‘nursing home’ exception to the enforceability of arbitration agreements . . . .” Appellants’ Brief at 43. Finally, Appellants maintain that Appellee’s admissions “unequivocally demonstrate[ ]” that the NAF provision was non-integral to the Agreement. Id. at 22. Appellants highlight that Appellee testified that she did not read the Agreement, much less understand and form an opinion on its NAF provision. In addition, Appellants remark that in Jones, the court found a similar provision enforceable because the plaintiff signed the agreement on her mother’s behalf without reviewing or negotiating its terms. Id. at 24 (citing Jones, 684 F. Supp. 2d at 1168; Meskill, 862 F. Supp. 2d at 975 (noting the lack of evidence that “the ‘exclusive’ designation of the NAF was an important consideration to . . . [the plaintiff]” and that the record did not indicate “[the plaintiff] was even aware of the NAF (or its Code) when he signed the Arbitration Agreement”)). Appellants fault the Superior Court for “excus[ing Appellee’s] failure to read the Agreement due to the fact that she (mistakenly) believed that she was required to sign . . . .” Id. Appellants claim this “twists” the burden of persuasion and would allow “any person who signs an otherwise valid arbitration agreement [to] later claim that a disputed provision is integral by simply testifying that he/she did not read it. . . .” Id. at 25-26 [J-24-2015] - 9 (citing Standard Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983) (stating that barring fraud, failure to read a contract “is an unavailing excuse or defense and cannot justify an avoidance, modification or nullification of the contract”) (internal quotations omitted)). Appellants add that this violates the U.S. Supreme Court’s mandate that courts interpret arbitration agreements “on an equal footing with other contracts[.]” Id. at 18 (quotation omitted). Anticipating Appellee’s counterargument that her testimony is inadmissible because the Agreement is unambiguous, Appellants assert that parol evidence is only forbidden “to explain or vary the terms of the contract.” Id. at 28 (quoting Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 437 (Pa. 2004) (quotation marks omitted)). Rather, Appellants offer the testimony “for the purpose of demonstrating that even if a NAF arbitrator were required then the Agreement may still be enforced because that term was not ‘integral’ to either party.” Id. at 29-30 (emphasis in original) (citation omitted). Appellants maintain there are other “compelling reasons” for admission of the testimony because the Agreement does not specify which terms are integral and is ambiguous regarding whether the parties intended to adjudicate disputes exclusively before an NAF arbitrator. Id. at 31-32 (citing Metzger v. Clifford Realty Corp., 476 A.2d 1, 5 (Pa. Super. 1984) (stating that “[w]here the language of the written contract is ambiguous, extrinsic or parol evidence may be considered to determine the intent of the parties”); Bickley v. Bickley, 447 A.2d 1025, 1029 (Pa. Super. 1982) (noting that “where a document is silent on a particular subject, it may be proved by parol evidence of what took place at the time of execution”)). Appellants also argue that Appellee waived any claim that her testimony is inadmissible by not objecting to its introduction and add that she has opened the door to its use since “her failure to read the Agreement is the [J-24-2015] - 10 primary basis upon which the Superior Court has found the terms . . . to be integral.” Id. at 33 (citation omitted). See Pellegrene v. Luther, 169 A.2d 298, 300 (Pa. 1961) (failure to object to the introduction of parol evidence results in waiver)).