Court Opinion

ID: 2799158
Source: CourtListenerOpinion
Date Created: 2015-05-07 03:35:13.442176+00
Date Added: 2024-06-11T11:29:30.830791
License: Public Domain

J-A34043-14

                            2015 PA Super 109

ARMSTRONG WORLD INDUSTRIES, INC.              IN THE SUPERIOR COURT OF
                                                    PENNSYLVANIA

                    v.

TRAVELERS  INDEMNITY  COMPANY,
TRAVELERS CASUALTY AND SURETY
COMPANY, AND CENTURY INDEMNITY
COMPANY

APPEAL OF:   TRAVELERS INDEMNITY
COMPANY AND TRAVELERS CASUALTY
AND SURETY COMPANY
                                                   No. 157 MDA 2014

            Appeal from the Order entered December 30, 2013
            In the Court of Common Pleas of Lancaster County
                     Civil Division at No: CI-12-06271

BEFORE: FORD ELLIOTT, P.J.E., SHOGAN, and STABILE, JJ.

OPINION BY STABILE, J.:                              FILED MAY 06, 2015

      Appellants/defendants Travelers Indemnity Company and Travelers

Casualty and Surety Company appeal from the December 30, 2013 order of

the Court of Common Pleas of Lancaster County (trial court), which

overruled Appellants’ preliminary objections in favor of Appellee/plaintiff

Armstrong World Industries, Inc. Upon careful review, we quash this appeal

as interlocutory.

      This case was initiated by Appellants’ denial of insurance coverage to

Appellee for environmental damage allegedly caused by the release of
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polychlorinated biphenyls (PCBs) to the site of Appellee’s manufacturing

facility in Macon, Georgia (Macon Site).         In denying coverage, Appellants

reasoned that Appellee had released the environmental claim at issue under

a settlement agreement executed by the parties on May 20, 1998

(Settlement Agreement).

       On June 20, 2012, Appellee filed a complaint against Appellants,1

alleging breach of contract and bad faith under Section 8371 of the Judicial

Code, 42 Pa.C.S.A. § 8371, and seeking declaratory relief. Specifically, with

respect to the declaratory relief, Appellee sought a declaration that

Appellants are bound by certain insurance policies by which they allegedly

agreed to pay or indemnify Appellee for environmental damage related to

the Macon Site.2 See Complaint, 6/20/12, ¶ 2, 25. Appellee also sought a

declaration that, under the insurance policies, Appellants are obligated to

defend or pay Appellee’s defense costs in connection with liability related to

the Macon Site. See id. at ¶ 34.

____________________________________________

1
  The complaint also listed Century Indemnity Company (Century) as a
defendant, but it is not a party to this appeal. Our review of the docket
indicates that Century filed separate preliminary objections to the complaint,
which the trial court ultimately overruled.
2
  Appellee alleged that the United States Environmental Protection Agency
(EPA) identified the Macon Site as an alleged source of release of PCBs and
as a result, required Appellee “to investigate and potentially remediate” any
environmental damage caused by the release. Complaint, 6/20/12, at
¶¶ 15-17.

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        On August 8, 2012, Appellants filed preliminary objections to the

complaint under Pa.R.C.P. No. 1028(a)(6),3 alleging that the dispute at the

heart of Appellee’s action is governed by an alternative dispute resolution

(ADR) provision of the Settlement Agreement. In support of this allegation,

Appellants argued that under the plain language of the Settlement

Agreement, the parties were required to submit the dispute at issue to the

ADR process provided for in the Settlement Agreement, which incorporated

ADR procedures from the June 19, 1985 “Agreement Concerning Asbestos-

Related Claims,” referred to by the parties as the “Wellington Agreement.”

See Preliminary Objections, 8/8/12, at ¶ 17. Additionally, Appellants argued

that, to the extent there is a dispute over the applicability, interpretation, or

performance of the Settlement Agreement, such dispute also must be

submitted to the ADR process.           Id.    The ADR provision of the Settlement

Agreement provides in relevant part:
        To the extent any disputes arise with respect to the application,
        interpretation or performance of this Agreement, the Parties
        agree to resolve such disputes in accordance with the alternative
        dispute resolution procedures set forth in Appendix C to the
        Wellington Agreement. For purposes of the previous sentence,
        “any disputes” include dispute over whether a particular matter
____________________________________________

3
    Rule 1028(a)(6) provides:
        Preliminary objections may be filed by any party to any pleading
        and are limited to the following grounds:
             ....
           (6) pendency of a prior action or agreement for alternative
           dispute resolution.
Pa.R.C.P. No. 1028(a)(6).

                                           -3-
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       is subject to alternative dispute resolution pursuant to this
       [Settlement Agreement].

Settlement Agreement, 5/20/98, at ¶ 11.1. As noted, the ADR provision of

the Settlement Agreement incorporated ADR procedures from the Wellington

Agreement. Specifically, Appendix C to the Wellington Agreement provides

for a range of ADR methods, from negotiation to binding or non-binding

arbitration. As explained in the introductory paragraph of Appendix C:
               Alternative Dispute Resolution (“ADR”) is the method for
       resolving disputed issues as provided in the [Wellington]
       Agreement. ADR involves three basic stages: 1) good-faith
       negotiation; 2) a proceeding concluding with a binding decision if
       litigation is not allowed and a non-binding decision if litigation is
       allowed (the “Proceeding”); and 3) an appellate process for the
       binding decision.
               At the negotiation stage, a person (the “Neutral”) will be
       selected who will be empowered to employ a full range of
       informal, mediational techniques with Principals[4] present. After
       the Proceeding there will be a final settlement conference with
       the Judge and/or the Neutral as a last attempt to reach a Party-
       fashioned solution. This is to be followed by a binding decision
       or litigation if litigation is allowed. The binding decision may be
       appealed to a panel of three Judges.

Appendix C to the Wellington Agreement, 6/19/85.

       On August 29, 2012, Appellee filed an “Answer” in response to

Appellants’ preliminary objections, denying Appellants’ allegations and

raising “New Matter,” in which Appellee averred the instant environmental

claim related to the Macon Site was not subject to the Settlement

Agreement. In particular, Appellee averred that the Settlement Agreement

____________________________________________

4
   Appendix C to the Wellington Agreement defines Principal as “[a]n
individual with settling authority” for a party to the Wellington Agreement.
Appendix C to the Wellington Agreement, 6/19/85, at 28.

                                           -4-
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released only sites that were designated as “Known Environmental Sites.”5

Answer and New Matter, 8/29/12, at ¶ 20.               Appellee further alleged that

Attachment C to the Settlement Agreement contained a list of all “Known

Environmental Sites and that Appellee “represented and warranted in the

Settlement Agreement that the sites listed in Attachment C . . . were the

only Known Environmental Sites of which it was aware as of the date of the

Settlement Agreement.”         Id.    Appellee finally alleged that the Macon Site

was not designated as a Known Environmental Site in the Settlement

Agreement. See id. at ¶ 21.

       On December 30, 2013, the trial court issued an opinion and order,

overruling    Appellants’     preliminary      objections.   The   trial   court   first

determined that, based on Appellants’ failure to offer any “evidence showing

that the Site was a Known Environmental Site as of the Effective Date of the

Settlement      Agreement,” it could not conclude that the Macon Site was

released under the Settlement Agreement. Trial Court Opinion, 12/30/13, at
____________________________________________

5
  Under the Settlement Agreement, Known Environmental Sites were defined
as “any and all sites and locations as to which [Appellee], as of the Effective
Date, has been notified in writing by any third party or has been made
aware as the result of the receipt by [Appellee] of a written environmental
audit (or its functional equivalent in writing) that [Appellee] is or may be
liable for an Environmental Claim. . . . A site or location that receives a
shipment or transfer of actual or alleged pollutants, wastes, or other
contaminants from a Known Environmental Site shall not by reason of such
pollutants, wastes, or other contaminants be a “Known Environmental Site.”
Settlement Agreement, 5/20/98, at ¶ 3.15. Effective Date was defined as
“the date on which this [Settlement] Agreement has been executed by all
Parties hereto,” i.e., May 20, 1998. Id. at ¶ 3.13.

                                           -5-
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4-5.   Second, the trial court determined that the ADR provision of the

Settlement Agreement did not apply to the environmental claim at issue. In

so determining, the trial court found that the Macon Site “was not a Known

Environmental Site at the time the Settlement Agreement was entered into

by the parties.”   Id. at 5.   The trial court, therefore, concluded that the

applicability of the ADR provision of the Settlement Agreement could not be

decided under the ADR provision of the Settlement Agreement, but had to

be made by the trial court. Id. at 5-6.

       On January 17, 2014, Appellants timely appealed to this Court. At the

trial court’s direction, Appellants filed a Pa.R.A.P. 1925(b) statement of

errors complained of on appeal, arguing:
       1. The trial court erred in overruling [Appellants’] [p]reliminary
       [o]bjection pursuant to [Rule 1028(a)(6)] to compel [Appellee]
       to submit its claims to alternative dispute resolution under the
       express and plain language of the alternative dispute resolution
       clause (the “ADR Clause”) in the Agreement of Compromise,
       Settlement and Release dated May 20, 1998, between
       [Appellants and Appellee.]
       2. The trial court erred in overruling [Appellants’] [p]reliminary
       [o]bjection pursuant to [Rule 1028(a)(6)] where the express
       language of the ADR clause and applicable law provide that any
       disagreement as to whether a particular dispute is subject to the
       ADR Clause must be resolved through alternative dispute
       resolution.

Rule 1925(b) Statement, 2/14/14, at ¶¶ 1-2. On March 26, 2014, the trial

court issued a one-page Pa.R.A.P. 1925(a) opinion, whereby it adopted its

December 30, 2013 opinion in support of its reasons for overruling

Appellants’ preliminary objections.

                                      -6-
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      On appeal, Appellants raise the same issues they raised in their Rule

1925(b) statement. Before we may address the merits of Appellants’ issues,

we first must determine whether we have jurisdiction to entertain this

appeal, given the manner by which Appellants have come to this Court. See

LeFlar v. Gulf Creek Indus. Park No. 2, 515 A.2d 875, 879 (Pa. 1986)

(noting a court may raise the issue of subject matter jurisdiction at any

time); accord Cont’l Bank v. Andrew Bldg. Co., 648 A.2d 551, 553 (Pa.

Super. 1994).

      In their brief, Appellants claim that this Court has jurisdiction over this

appeal by virtue of Pa.R.A.P. 311(a)(8) and Sections 7320(a)(1) and

7342(a) of the Uniform Arbitration Act (Act), 42 Pa.C.S.A. §§ 7320(a)(1),

and 7342(a). Appellants’ Brief at 1. We disagree.

      It is well-settled that “[u]nder Pennsylvania law, an appeal may only

be taken from an interlocutory order as of right (Pa.R.A.P. 311), from a final

order (Pa.R.A.P. 341), from a collateral order (Pa.R.A.P. 313), or from any

interlocutory order by permission (Pa.R.A.P. 31[2], [Pa.R.A.P.] 1311, 42

Pa.C.S.A. § 702(b)).” Cont’l Bank, 648 A.2d at 553. Appellants here argue

jurisdiction only on the basis of Rule 311, which enumerates several

categories of interlocutory orders that are appealable as of right. Specifically

at issue here is Rule 311(a)(8), which provides:

      (a) General rule. An appeal may be taken as of right and
      without reference to Pa.R.A.P. 341(c) from:
          ....
         (8) Other cases. An order which is made appealable by
         statute or general rule.

                                      -7-
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Pa.R.A.P. 311(a)(8) (emphasis added).      Appellants claim only that, under

Rule 311(a)(8), the order sub judice is rendered appealable by Sections

7320(a)(1) and 7342(a) of the Act. Section 7320(a)(1) of the Act provides

that “[a]n appeal may be taken from . . . [a] court order denying an

application to compel arbitration made under section 7304 (relating to

proceedings to compel or stay arbitration).” 42 Pa.C.S.A. § 7320(a)(1).

Section 7342(a), relating to common law arbitration, provides, inter alia,

that Section 7320(a) of the Act, except subsection (a)(4), is applicable also

to common law arbitration. See 42 Pa.C.S.A. § 7342(a). In support of their

claim, Appellants rely on arbitration cases where we have held that appellate

review of a trial court’s order denying a motion to compel arbitration is

permissible under Rule 311(a)(8).       See, e.g., Midomo Co., Inc. v.

Presbyterian Hous. Dev. Co., 739 A.2d 180, 184 (Pa. Super. 1999)

(“While an order denying preliminary objections is generally not appealable,

there exists a narrow exception to this oft-stated rule for cases in which the

appeal is taken from an order denying a petition to compel arbitration.”).

      To render an order overruling preliminary objections seeking to compel

arbitration appealable under the Act, a party must prove that the dispute is

bound by an arbitration agreement, which calls for either statutory or

common law arbitration. Unless an arbitration agreement expressly provides

for statutory arbitration, the law presumes that the parties intended to

submit their disputes to common law arbitration.     See Derry Twp. Mun.

Auth. v. Solomon & Davis, Inc., 539 A.2d 405, 410 (Pa. Super. 1988)

                                    -8-
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(“Because the arbitration provision contained in Derry’s contracts with

Solomon does not expressly provide for statutory arbitration, the agreement

does not overcome the presumption that the controversy will be governed

by the rules pertaining to common law arbitration.”). Indeed, Section 7302

of the Act provides:

      An agreement to arbitrate a controversy on a nonjudicial
      basis shall be conclusively presumed to be an agreement to
      arbitrate pursuant to Subchapter B (relating to common law
      arbitration) unless the agreement to arbitrate is in writing and
      expressly provides for arbitration pursuant to this subchapter
      or any other similar statute, in which case the arbitration shall
      be governed by this subchapter.

42 Pa.C.S.A. 7302 (emphasis added).

      With these principles in mind, the instant case is distinguishable from

our decision in Midomo because the Settlement Agreement here contains an

ADR provision. As stated earlier, Appellants rely on the ADR provision of

the Settlement Agreement to compel Appellee to submit its environmental

claim related to the Macon Site to the ADR process in accordance with the

ADR procedures outlined in the Wellington Agreement.      As Appellee points

out, however, “ADR is not synonymous with arbitration.” Appellee’s Brief at

11. We agree. ADR is defined as “[a] procedure for settling a dispute by

means other than litigation, such as arbitration or mediation.” BLACK’S LAW

DICTIONARY (9th ed. 2009). Thus, “‘ADR can be defined as encompassing all

legally permitted processes of dispute resolution other than litigation.’” Id.

(citing Stephen J. Ware, Alternative Dispute Resolution § 1.5, at 5-6

(2001)).

                                    -9-
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      Here, the Settlement Agreement subjects disputes (including disputes

over the applicability of the Settlement Agreement) to the ADR procedures

provided for in Appendix C to the Wellington Agreement.                    Those ADR

procedures, however, based on our review of the Wellington Agreement, are

not   limited   to   arbitration.      On   the    contrary,    as   Appellants   tacitly

acknowledge, the ADR procedures in the Wellington Agreement range from

negotiation to binding arbitration.             See Appellants’ Brief at 5-6 (“The

Settlement Agreement contains the ADR Clause, a dispute resolution

provision that requires [Appellee] and [Appellants] to resolve any dispute

relating to the Settlement Agreement, including any disagreement over

whether a particular dispute is subject to the ADR clause, through certain

[ADR] procedures.”) (emphasis added).                Appellants also do not provide

any legal authority—nor does our research yield any—for the proposition

that ADR provisions, like the one at issue here, are treated the same way as

provisions requiring only statutory or common law arbitration.                      We,

therefore, conclude that, under Sections 7320(a)(1) and 7342(a), Appellants

are not entitled to seek appellate review of the trial court’s interlocutory

order overruling their preliminary objections, because the ADR provision

here is not arbitration—even though it may contemplate arbitration at some

juncture.

      Because Appellants fail to establish the ADR provision at issue here

constitutes     an   arbitration    provision    within   the   meaning   of   Sections

7320(a)(1) and 7342(a), we conclude they may not invoke Rule 308(a)(8)

                                         - 10 -
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to implicate the jurisdiction of this Court. Accordingly, we quash this appeal

as interlocutory.

      Appeal quashed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 5/6/2015

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