Court Opinion

ID: 3155446
Source: CourtListenerOpinion
Date Created: 2015-11-17 20:09:23.294694+00
Date Added: 2024-06-11T12:01:18.362517
License: Public Domain

J-A09028-15

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P 65.37

THOMAS S. ETZLER, INDIVIDUALLY AND :              IN THE SUPERIOR COURT OF
DERIVATIVELY   ON      BEHALF   OF :                   PENNSYLVANIA
RECYCLING EQUIPMENT CORPORATION, :
                                   :
              Appellant            :
                                   :
          v.                       :
                                   :
GUNTHER “BUD” ETZLER, STEPHEN P. :
ETZLER, WILMA D. ETZLER, RECYCLING :
EQUIPMENT CORP., INC.,             :
                                   :
              Appellees            :              No. 2288 EDA 2014

              Appeal from the Judgment entered October 9, 2014,
                 Court of Common Pleas, Montgomery County,
                 Civil Division at No. 09-25465 and 09-26544

BEFORE: BOWES, DONOHUE and STABILE, JJ.

MEMORANDUM BY DONOHUE, J.:                        FILED NOVEMBER 17, 2015

        Appellant, Thomas S. Etzler (“Thomas”), appeals from the judgment

entered on October 9, 2014 following the issuance of an arbitrator’s award in

favor    of   Appellees,   Gunther   Etzler   (“Gunther”),   Stephen   P.   Etzler

(“Stephen”), Wilma D. Etzler (“Wilma”), and Recycling Equipment Corp., Inc.

(“REC”). For the reasons that follow, we affirm in part, reverse in part, and

remand to the trial court for further proceedings in accordance with this

Memorandum.

        This case arises from a family dispute between a father (Gunther) and

his two sons (Thomas and Stephen), each of whom were equal one-third
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owners of the stock of REC. All three were employees of REC, with Thomas

serving as its president. According to the trial court,

            The dispute between the shareholders originated
            with a failed attempt by [Thomas] to fire his father,
            [Gunther,] and force him to sell his shares. Thomas
            claims he became aware of a plan by his brother
            Stephen and Gunther to freeze him out as a minority
            shareholder. Thomas’ plan failed because Gunther
            and his wife [Wilma],1 who believed themselves to
            be the sole directors of REC, convened a special
            meeting of the board of directors on August 12,
            2009, and passed a resolution that removed Thomas
            as president, rescinded the termination of Gunther’s
            employment, appointed Gunther as president of REC,
            appointed new corporate counsel, and revoked
            Thomas’ check-signing authority for the corporation.2

            1
              Wilma was a purported director of the corporation
            but never a shareholder.
            2
                 In mid-November, 2009, additional corporate
            documents were located that revealed Stephen
            alone, rather than Gunther and Wilma, constituted
            the REC board in August 2009.          Accordingly,
            pursuant to a board resolution dated November 17,
            2009, Stephen promptly ratified and confirmed the
            actions taken by Gunther and Wilma, acting as the
            ostensible board three months earlier.

Trial Court Opinion, 8/28/2012, at 1-2.

      On August 17, 2009, Thomas commenced suit by a writ of summons

at civil action number 2009-25465 against REC, Gunther, Stephen and

Wilma (collectively, the “Appellees”).     On August 26, 2009, REC filed a

complaint against Thomas at civil action number 2009-26554), seeking to

enjoin Thomas from, inter alia, disclosing or transmitting REC’s confidential

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information or communicating with REC’s customers. The parties agreed to

an injunction and standstill agreement, at which time the parties attempted

to negotiate the purchase of Thomas’ stock in REC pursuant to the terms of

a shareholder’s agreement executed by the three shareholders and REC in

1998 (hereinafter, the “Buy Sell Agreement”).

      As explained therein, the purpose of the Buy Sell Agreement is to keep

“all of the common stock of [REC] [] owned by those who are actually

engaged in the conduct of the business.”        Motion to Stay Operation of

Shareholder Agreement and Dissolve the September 2, 2009 Stipulated

Injunction and Standstill Agreement (hereinafter, the “Motion to Stay”),

2/24/2010, Exhibit F. Pursuant to the terms of the Buy Sell Agreement, the

termination    of   a   shareholder’s   employment,   “whether   voluntary   or

involuntary,” constitutes an offer to sell all of his stock at book value to (1)

REC, for thirty days, (2) the remaining shareholders, for thirty days, or (3)

to REC, which must purchase the shares. Motion to Stay, 2/24/2010, Exhibit

F ¶¶ 2, 4-6.

      When negotiations to determine the book value of REC’s stock failed,

on February 24, 2010 Thomas filed his Motion to Stay, in which he alleged

generally that the Appellees had “frustrated the buyout process” by refusing

to provide Thomas and his accountant with the necessary information and

documentation to assess the value of his stock. Thomas also attached to the

Motion to Stay a draft complaint in which he set forth numerous personal

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causes of action against the Appellees. Gunther and Stephen responded to

the Motion to Stay by asking the trial court to order the parties to arbitrate

their disputes as required by the arbitration provision in the Buy Sell

Agreement.1

       On December 30, 2011, the Honorable Kent H. Albright granted

Thomas’ motion to dissolve the stipulated injunction, but denied the request

to stay the operation of the arbitration provision of the Buy Sell Agreement.

Instead, Judge Albright ordered the parties to arbitrate.     On January 17,

2012, Thomas filed a complaint at civil action number 2009-25465

(hereinafter, the “Complaint”).   Unlike the draft complaint attached to the

Motion to Stay, the Complaint asserted both personal claims against

Gunther, Stephen and Wilma as well as derivative claims on behalf of REC

against them.    In particular, Counts I and II of the Complaint sets forth

derivative claims by REC for declaratory relief and breach of fiduciary duties.

1
    Paragraph 18 of the Buy Sell Agreement provides:

             18. Arbitration. 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.

Motion to Stay, 2/24/2010, Exhibit F ¶ 18.

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Counts III and IV set forth Thomas’ personal claims for the appointment of a

custodian and for wrongful discharge.      Counts V and VI set forth both

personal and derivative claims for civil conspiracy and aiding and abetting

liability.

        In response to preliminary objections to the Complaint, by order and

opinion dated August 28, 2012, the Honorable Stanley R. Ott 2 ordered all of

the claims in Thomas’ complaint to be arbitrated in accordance with the Buy

Sell Agreement, including the derivative claims. On November 7, 2013, the

arbitrator, William Ewing (“Ewing”), issued a decision in favor of the

Appellees, finding against Thomas on all six claims. On December 9, 2013,

Thomas filed a petition to vacate the arbitration award, which the trial court

(per Judge Ott) denied pursuant to an opinion and order dated June 30,

2014.

        Following the entry of judgment, on appeal Thomas presents the

following four issues for our consideration and determination:

        1.   Did the trial court commit an error of law in
             compelling arbitration where the claims in [Thomas’]
             Complaint were outside the scope of the arbitration
             clause?

        2.   Did the trial court commit an error of law in
             determining that the derivative claims on behalf of
             the corporation for breach of fiduciary duty were
             actually direct claims and thus subject to the

2
  Judge Albright reached mandatory retirement status at the end of 2011
and became a Senior Judge in January 2012.

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            arbitration claim contained in a contract governing
            only the transfer of shares?

      3.    Did the trial court abuse its discretion when it
            refused    to    grant  [Thomas’]    motion   for
            reconsideration based on an intervening change in
            the applicable law?

      4.    Did the trial court commit an error of law or abuse
            its discretion when it refused to vacate the
            arbitrator’s award based on the denial to [Thomas]
            of a full and fair hearing?

Thomas’ Brief at 4-5.

      Thomas’ first three issues on appeal challenge the trial court’s decision

to refer all of the claims in Thomas’ Complaint to arbitration. In determining

whether a claim is subject to arbitration, judicial inquiry is limited to the

questions of whether a valid agreement to arbitrate was entered into and

whether the dispute involved falls within the scope of the arbitration

provision. McNulty v. H & R Block, Inc., 843 A.2d 1267, 1269 (Pa. Super.

2004). As an appellate court, in determining the propriety of a trial court’s

order on preliminary objections in the nature of a petition to compel

arbitration, we examine the trial court's ruling for abuse of discretion or

error of law.    Pittsburgh Logistics Systems, Inc. v. Professional

Transportation and Logistics, Inc., 803 A.2d 776 (Pa. Super. 2002). Our

scope of review is plenary. McNulty, 843 A.2d at 1269 (citing Huegel v.

Mufflin Const. Co., Inc., 796 A.2d 350, 354 (Pa. Super. 2002)).

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      Judge Ott’s written opinions are not helpful in addressing the

arbitrability issues. With respect to Thomas’ direct claims, Judge Ott relied

upon Judge Albright’s prior order on the Motion to Stay directing the parties

to arbitration. Trial Court Opinion, 8/28/2012, at 5. Judge Ott credited the

Appellees’ contention that the direct claims in Thomas’ Complaint were also

set forth in the draft complaint attached to the Motion to Stay. According to

this reasoning, because Judge Albright denied the Motion to Stay, he must

have determined that the direct claims in the attached draft complaint were

within the scope of the arbitration provision of the Buy Sell Agreement. Id.

Unfortunately, Judge Albright’s December 30, 2011 order merely denies the

request to stay arbitration and does not explain the basis for doing so. Trial

Court Order, 12/30/2011, at 2.     We note that Thomas’ allegations in the

Motion to Stay itself (rather than in the attached draft complaint) related

solely to the Appellees’ efforts to disrupt the valuation process, thus clearly

raising issues within the scope of that contract’s arbitrability provision.

Moreover, and more importantly, Judge Albright’s order does not indicate

that he even considered the arbitrability of the claims in the (then unfiled)

draft complaint. And Judge Ott, like Judge Albright, offered no explanation

or rationale regarding the arbitrability of the direct claims in Thomas’

Complaint. Trial Court Opinion, 8/28/2012, at 6 (“Because the complaints in

these actions raise virtually identical claims [as in the draft complaint], we

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are constrained to make the same analysis as did Judge Albright … that

these claims are subject to the mandatory ADR provision.”).

        Instead, Judge Ott observed that Thomas’ Complaint, as opposed to

his prior draft complaint, included shareholder derivative claims asserted on

behalf of REC, and that as a result the sole issue before him was whether

Thomas, by “recasting” his claims as derivative rather than direct, could

“avoid Senior Judge Albright’s directive to submit the claims to ADR?” Id. at

3.     To answer this question, Judge Ott cited to Section 7.01(d) of the

American      Law   Institute’s   Principles   of   Corporate   Governance   (“ALI

Principles”).    Section 7.01(d) provides that in closely held corporations,

when certain conditions obtain, derivative claims against other shareholders

may be treated as direct claims.3 Id. at 6-7. While Pennsylvania appellate

courts had never adopted Section 7.01(d), Judge Ott noted that in Cuker v.

Mikalauskas, 692 A.2d 1042 (Pa. 1997), our Supreme Court adopted

3
     Section 7.01(d) of the ALI Principles of Corporate Governance provides:

              (d) In the case of a closely held corporation [§ 1.06],
              the court in its discretion may treat an action raising
              derivative claims as a direct action, exempt it from
              those restrictions and defenses applicable only to
              derivative actions, and order an individual recovery,
              if it finds that to do so will not (i) unfairly expose the
              corporation or the defendants to a multiplicity of
              actions, (ii) materially prejudice the interests of
              creditors of the corporation, or (iii) interfere with a
              fair distribution of the recovery among all interested
              persons.

ALI Principles of Corporate Governance § 7.01(d) (1994).

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Sections 7.02 through 7.10 and 7.13 of the ALI Principles, and indicated that

“[o]our adoption of the [specified] sections is not a rejection of other

sections not cited. … Courts of this Commonwealth are free to consider other

parts of the [ALI Principles] and utilize them if they are helpful and appear to

be consistent with Pennsylvania law.” Id. at 604 n.5.

      In Hill v. Ofalt, 85 A.3d 540 (Pa. Super. 2013), this Court

subsequently determined that our Supreme Court would not adopt Section

7.01(d) of the ALI Principles to the extent that it would permit “courts to

ignore the corporate form and treat derivative claims as direct claims and

allow an individual recovery on a derivative claim.”     Id. at 553-556.    We

concluded that Section 7.01(d) is inconsistent with Pennsylvania law,

including in particular Section 1717 of the Business Corporation Law, which

limits the standing to sue to enforce a director’s duty to “the corporation” or

to “a shareholder … by an action in the right of the corporation.” Id. at 556

(citing 15 Pa. C.S.A. § 1717). As such, in Hill we held that since appellant

“willingly chose to incorporate and willingly chose to create the separate

entity, ... [r]edress for any injury” to the corporation belongs exclusively to

the corporation and not to individual shareholders.4 Id.

4
   Given our disposition of this appeal, including the application of our
decision in Hill, Thomas’ third issue on appeal (contending that the trial
court erred in not reconsidering its August 28, 2012 order and opinion) is
moot.

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      While it is now clear that Judge Ott should not have relied upon section

7.01(d) of the ALI Principles, we disagree with Thomas that the derivative

nature of some of his claims is dispositive of their arbitrability. As discussed

hereinabove, REC is a signatory to the Buy Sell Agreement and has rights

and obligations thereunder, including the first option to purchase the shares

of a departing shareholder and the obligation to purchase said shares if the

remaining shareholders decline to do so. Motion to Stay, 2/24/2010, Exhibit

F ¶¶ 2, 4-6.   As such, any derivative claims brought on REC’s behalf are

arbitrable if they relate in any way to the execution of the procedures set

forth in the Buy Sell Agreement, including the determination of the book

value of shares to be purchased by REC.

      Accordingly, this Court must review each of the claims in Thomas’

Complaint to determine if they arise under or relate to the Buy Sell

Agreement or the breach thereof.       Motion to Stay, 2/24/2010, Exhibit F ¶

18. In Pennsylvania, the issue of whether a particular dispute falls within a

contractual arbitration provision is a matter of law for a court to decide.

Huegel, 796 A.2d at 354.         To determine whether the claim is subject to

arbitration the court engages in a two-prong analysis:        first, does a valid

agreement exist, and second, is the dispute within the scope of the

agreement. Keystone Technology Group, Inc. v. Kerr Group, Inc., 824

A.2d 1223, 1227 (Pa. Super. 2003).             The merits of the claims to be

arbitrated   should   not   be   examined      when   performing   this   analysis.

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Strausser Enterprises, Inc. v. Segal & Morel, Inc., 89 A.3d 292, 296

(Pa. Super. 2014). Pennsylvania has a liberal policy of favoring arbitration,

but this policy “does not require the rubber stamping of all disputes as

subject to arbitration.” Pisano v. Extendicare Homes, Inc., 77 A.3d 651,

661 (Pa. Super. 2013) (quoting McNulty v. H & R Block, Inc., 843 A.2d

1267, 1271 (Pa. Super. 2004)), appeal denied, 86 A.3d 233 (Pa. 2014),

cert. denied, 134 S. Ct. 2890 (2014).

     Count I of Thomas’ Complaint is a derivative claim seeking declaratory

relief “to determine the legal obligations under Pennsylvania law” of REC for

the period between August 12, 2009 until at least November 17, 2009.

Specifically, Thomas contends that

           44. During that period, [Gunther] and [Wilma]
           terminated [Thomas] as [REC’s] President; reversed
           [Thomas’] decision to terminate [Gunther] as an
           employee; promoted [Gunther] to President; and
           hired [REC’s] counsel to bring claims against
           [Thomas].

Complaint, 1/17/2012, ¶ 44.    Thomas argues that these acts, including in

particular his termination, violated Pennsylvania law because Gunther and

Wilma were not REC’s board of directors and thus their acts were null and

void. Id. ¶¶ 46-47. Moreover, the later attempt by Stephen (the purported

sole member of REC’s board of directors) to ratify the actions of Gunther and

Wilma was ineffective because (1) Stephen was not properly elected to the

board of directors, and (2) even if Stephen was the sole member of the

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board of directors, it is not legally possible under Pennsylvania law to ratify

null and void acts.   Id. ¶¶ 48-51.      As a result, under Count I Thomas

requests a declaration that the acts of Gunther, Wilma, and Stephen in, inter

alia, terminating his employment, were illegal. The prayer for relief further

requests “such other and further relief as may be just and proper under the

circumstances.” Id.

      We cannot agree with Thomas that the trial court erred in its

determination that Count I of the Complaint was arbitrable under the Buy

Sell Agreement. The Buy Sell Agreement governs the sale of shares of REC

upon an event of termination, whether voluntary or involuntary, setting forth

the procedure by which said sale is to be effectuated. A buy out of shares

cannot occur without a valid termination, and thus this claim “arises out of

or relates to” the Buy Sell Agreement.

      We likewise conclude that the trial court did not err in deciding that

Counts II, IV, V, and VI of Thomas’ Complaint are arbitrable under the Buy

Sell Agreement. Count II asserts a derivative claim for breach of fiduciary

duties owed to REC.        The allegations in Count II, including those

incorporated by reference, allege a variety of financial irregularities by the

Appellees, including failures (1) to “maximize the assets” of REC, (2) to

maintain accurate and complete financial records, including “egregious

lapses” in recordkeeping and accounting practices, (3) to avoid self-dealing

transactions, (4) to develop the business of REC and operate it in a manner

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beneficial to REC. Id. ¶¶ 31-35, 58-59. Thomas also incorporates specific

allegations against the Appellees directly related to efforts to value his stock

pursuant to the Buy Sell Agreement, including refusals to produce corporate

books and records in October 2009. Id. ¶¶ 27-28.

      Similarly, in connection with Count IV, a direct claim for wrongful

discharge, Thomas contends that the Appellees terminated him to, inter alia,

cover up fraudulent financial statements, and to this end he incorporates a

series of allegations related to efforts by Appellees to manipulate REC’s

financial books and records and to present false information to him as the

minority shareholder. Id. ¶¶ 74, 35. Counts V and VI are claims for civil

conspiracy and aiding and abetting liability for the actions set forth in Counts

II and IV.

      In our view, the trial court did not err in deciding that these Counts

are arbitrable. The Buy Sell Agreement contains a detailed methodology for

determining the book value of the shares of stock to be purchased (either by

REC or the remaining shareholders), including the process of appointing

accountants and a detailed list of necessary and proper adjustments to book

value to be incorporated into the calculations. As a result, Thomas’ claims of

fraud, self-dealing, and financial irregularities all relate to the determination

of the purchase price of his shares pursuant to the Buy Sell Agreement. In

short, claims based upon allegations of financial improprieties relate to the

proper calculation of book value of the stock and are, therefore, arbitrable.

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      Finally, Count III of Thomas’ Complaint sets forth a claim pursuant to

section 1767(a)(2) of Pennsylvania’s Business Corporation Law, which

permits a trial court to appoint a custodian for a closely-held corporation if

the directors or those in control have acted “illegally, oppressively, or

fraudulently” toward a shareholder owning 5% or more of the outstanding

shares of the corporation.    15 Pa. C.S.A. § 1767(a)(2).      Thomas, as the

owner of more than 5% of the outstanding stock of REC, has standing to

seek the appointment of a custodian under this provision.          Because the

appointment of a custodian does not arise from or relate to any provision of

the Buy Sell Agreement, this claim is not subject to its arbitration provision.

      For these reasons, we affirm the trial court’s order dated August 28,

2012 with respect to Counts I, II, IV, V, and VI of Thomas’ Complaint, but

reverse with respect to Count III. On remand, the trial court must decide

Thomas’ claim in Count III, which we conclude should not have been

referred to arbitration.

      Because we are remanding for further proceedings, we will also

address Thomas’ fourth issue on appeal, in which he contends that the trial

court erred in not vacating the arbitration award because the record reflects

that he was denied a full and fair hearing.      The outcomes of non-judicial

arbitration proceedings are typically binding, and our review of a common

law arbitration award is narrowly circumscribed. Vogt v. Liberty Mut. Fire

Ins. Co., 900 A.2d 912, 921 (Pa. Super. 2006) (citing F.J. Busse Co., Inc.

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v. Sheila Zipporah, L.P., 879 A.2d 809, 811 (Pa. Super. 2005)). Courts

may not vacate or modify arbitration decision unless it is clearly shown that

a party was denied a hearing or that fraud, misconduct, corruption or other

irregularity caused the rendition of an unjust, inequitable or unconscionable

award. See, e.g., Richmond v. Prudential Prop. & Cas. Ins. Co., 856

A.2d 1260, 1264 (Pa. Super. 2004).

      Here, Thomas contends that he was denied a hearing because the

arbitrator (1) refused to permit discovery or the introduction of evidence of

events after December 31, 2009; and (2) denied him access to documents

withheld pursuant to claims of attorney-client privilege even though the

allegedly privileged documents were placed at issue and/or because the

privilege had been waived.

      On appeal, Thomas relies on three cases, Smaligo v. Fireman’s

Fund Ins. Co., 247 A.2d 577 (Pa. 1968), Zak v. Prudential Prop. & Cas.

Ins. Co., 713 A.2d 681 (Pa. Super. 1998), and Andrew v. CUNA

Brokerage Services, Inc., 976 A.2d 496 (Pa. Super. 2009).             Thomas

contends that these cases stand for the proposition that an arbitration award

must be vacated if the arbitrator refuses to “admit relevant evidence of

great import.”   Thomas’ Brief at 42.     In Andrew, this Court vacated an

arbitration award entered after the arbitrator ruled that the losing party was

not entitled to an evidentiary hearing.

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          “Arbitration, while not surrounded by the technical
          procedural safeguards incident to litigation, is not a
          wholly informal process and requires for its validity
          the observance of certain minimum standards
          indispensable to the securing of a fair and impartial
          disposition of the merits of a controversy.” Scholler
          Bros. v. Otto A.C. Hagen Corp., 158 Pa. Super.
          170, 44 A.2d 321, 322 (1945). These minimum
          standards require that both parties are provided with
          notice, all the arbitrators must sit at the hearing,
          each side is entitled to be heard and to be present
          when the other party's evidence is being given and,
          unless the submission allows a decision by a majority
          of the arbitrators, all must join in the award. Id.
          See also Allstate Ins. Co. v. Fioravanti, 451 Pa.
          108, 299 A.2d 585, 588 (1973) (once a dispute has
          been submitted to arbitration, the parties are
          entitled to a hearing with “the necessary essentials
          of due process, i.e., notice and opportunity to be
          heard and to defend in an orderly proceeding
          adapted to the nature of the case before a tribunal
          having jurisdiction of the cause.”); Reisman v.
          Ranoel Realty Co., 224 Pa. Super. 220, 303 A.2d
          511, 514 (1973) (arbitrations are not wholly informal
          proceedings and the basic principles of hearing
          conduct must be adhered to, with the arbitration
          process requiring for its validity the observance of
          certain minimum standards indispensable to the
          securing of a fair and impartial disposition of the
          merits of a controversy, i.e., a full hearing with the
          opportunity to be heard and to present evidence.)

          “[A]djudicatory action cannot validly be taken by any
          tribunal, whether judicial or administrative, except
          upon a hearing, wherein each party shall have the
          opportunity to know of the claims of his opponent, to
          hear the evidence introduced against him, to cross-
          examine witnesses, to introduce evidence in his own
          behalf and to make argument.” Fioravanti, 299
          A.2d at 588. Therefore, where a matter is submitted
          to arbitration, arbitrators are obliged to abide by the
          minimal procedural requirements necessary for
          common law arbitration which entails granting the
          parties a full and fair hearing.

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Andrew, 976 A.2d at 501-02.

       In Smaligo and Zak, the arbitrator conducted an evidentiary hearing,

but refused to permit the introduction of expert testimony before ruling

against the party proffering it. Smaligo, 247 A.2d at 580; Zak, 713 A.2d at

686.    Thomas contends that as in Smaligo and Zak, in this case the

arbitrator refused to permit the introduction of any evidence after December

31, 2009 and further refused to permit him access to potentially relevant

documents withheld on privilege grounds.      We cannot agree.    In Smaligo

and Zak, the arbitrators refused to permit the introduction of an expert

witness’ testimony in its entirety, thus completely precluding the losing

parties from exercising their basic procedural right to an opportunity to be

heard and defend themselves.        The denial of this minimum procedural

requirement deprived these litigants of fundamental due process, namely “a

full hearing with the opportunity to be heard and to present evidence.”

Andrew, 976 A.2d at 502.

       In this case, by contrast, the arbitrator did not preclude the testimony

of any witness in its entirety.    Instead, the arbitrator made evidentiary

rulings regarding the appropriate limits on evidence, including a time

limitation and the discovery of some (but not all) allegedly privileged

materials. While the arbitrator did not set forth the bases for his rulings in

his written opinion/decision, such information is not necessary in this

context.   Thomas has not cited to any authority suggesting that it is the

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proper function or province of this Court to pass on the discretion of an

arbitrator’s evidentiary rulings. Rule R21 of the AAA Commercial Arbitration

Rules provides that discovery shall be conducted “at the discretion of the

arbitrator,” and Rule R31(a) states that evidence may be introduced at the

evidentiary      hearing    “as    the    arbitrator   may   deem    necessary   to   an

understanding and determination of the dispute.”                    Rule 31(a) further

provides that formal rules of evidence need not be followed. Finally, R30(b)

gives the arbitrator the discretion to “conduct the proceedings with a view to

expediting the resolution of the dispute.”

      Here, these rules appear to have provided the arbitrator with the

authority to make the rulings now questioned by Thomas on appeal. This

Court cannot and will not review the reasonableness or propriety of these

rulings.   Rather, we need only conclude that the arbitrator’s evidentiary

decisions in this case did not deprive Thomas of any fundamental due

process rights.

      As set forth hereinabove, the trial court’s rulings are affirmed in part

and reversed in part.        In summary, we affirm the trial court’s order dated

August 28, 2012 with respect to Counts I, II, IV, V, and VI of Thomas’

Complaint, but reverse with respect to Count III.                 As to Count III, on

remand     the    trial    court   must     decide     Thomas’   claim   requesting   the

appointment of a custodian pursuant to § 1767(a)(2) of Pennsylvania’s

Business Corporation Law.            The case is remanded to the trial court for

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further   proceedings   consistent   with     this   Memorandum.   Jurisdiction

relinquished.

      Stabile, J. joins the Memorandum.

      Bowes, J. files a Concurring and Dissenting Memorandum.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/17/2015

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