Court Opinion

ID: 4283682
Source: CourtListenerOpinion
Date Created: 2018-06-12 18:45:52.098509+00
Date Added: 2024-06-11T09:24:20.259875
License: Public Domain

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    UC TWISTER, LLC                            :   IN THE SUPERIOR COURT OF
                                               :        PENNSYLVANIA
                                               :
                v.                             :
                                               :
                                               :
    SOFT PRETZEL FRANCHISE                     :
    SYSTEMS, INC. AND RONALD HEIL              :
                                               :   No. 348 EDA 2018
                                               :
    APPEAL OF: SOFT PRETZEL                    :
    SYSTEMS, INC.                              :

               Appeal from the Order Entered December 15, 2017
      In the Court of Common Pleas of Philadelphia County Civil Division at
                       No(s): July Term, 2017, No. 03995

BEFORE: SHOGAN, J., LAZARUS, J., and DUBOW, J.

MEMORANDUM BY LAZARUS, J.:                                FILED JUNE 12, 2018

        Soft Pretzel Franchise Systems, Inc. (Soft Pretzel) appeals from the trial

court’s order, entered in the Court of Common Pleas of Philadelphia, denying

its petition to compel mediation and arbitration.1       After careful review, we

affirm.

        On May 22, 2006, UC Twister, LLC (UC) and Soft Pretzel entered into a

factory franchise agreement (Franchise Agreement) that granted UC the right

to operate a Philly Pretzel Factory franchise at 3734 Spruce Street,

Philadelphia, Pennsylvania. The Franchise Agreement contained the following,

relevant provisions:

____________________________________________

1   This order is appealable as of right. See Pa.R.A.P. 311(a)(8).
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        16.2.2. Mediation. At [Soft Pretzel’s] option, all claims or
        disputes between [UC Twister] and [Soft Pretzel] or [Soft
        Pretzel’s] affiliates arising out of, or in any way relating to, this
        Agreement or any other agreement by and between [UC Twister]
        and [Soft Pretzel] or [Soft Pretzel’s] affiliates, or any of the
        parties’ respective rights and obligations arising from such
        agreement must be submitted first to mediation, in
        Philadelphia County, Pennsylvania under the auspices of the
        American Arbitration Association (“AAA”), in accordance with
        AAA’s Commercial Mediation Rules then in effect.              Before
        commencing any legal action against [Soft Pretzel] or [its]
        affiliates with respect to any such claim or dispute, [UC Twister]
        must submit a notice to [Soft Pretzel], which specifies, in detail,
        the precise nature and grounds of such claim or dispute.

                                           *     *   *

        16.2.3. Arbitration. Except as otherwise provided in this
        Agreement, all disputes and claims relating to this
        Agreement or any other agreement entered into between
        the parties, the rights and obligations of the parties, or any other
        claims or causes of action relating to the making, interpretation,
        or performance of either party under this Agreement, shall be
        settled by arbitration in Philadelphia County, Pennsylvania, in
        accordance with the Federal Arbitration Act and the Commercial
        Arbitration Rules of the American Arbitration Association (“AAA”).

Franchise Agreement, 5/22/06, at §§ 16.2.2-.2.3 (emphases added).

        Under the Franchise Agreement, UC was also granted an exclusive right

of first refusal to enter into another franchise agreement to open a Philly

Pretzel Factory at Amtrak’s 30th Street Station. On April 4, 2016, Ronald Heil

entered into an agreement (April Agreement) with UC, whereby UC agreed to

sell Heil its right of first refusal for the 30th Street pretzel location for

$115,000.00.2 The April Agreement contained a “Governing Law” provision

____________________________________________

2   The purchase price was subsequently modified to $103,000.00.

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providing that “[t]he Parties irrevocably and unconditionally acknowledge and

agree that any proceeding arising out of or from, in connection with or as a

result of this Agreement or any of the transactions contemplated hereby shall

be brought exclusively in the courts of Philadelphia County[.]”            April

Agreement, 4/4/16, at ¶ 5 (emphasis added).

      Pursuant to the April Agreement, UC and Heil agreed to make Soft

Pretzel an escrow agent for the purchase funds. Id. at ¶ 1(c). Under the April

Agreement, if Amtrak awarded Heil the bid/right to enter lease negotiations

for the 30th Street location, Heil was to notify UC and Soft Pretzel within

twenty-four hours and Soft Pretzel would release the funds to UC. Id. at ¶

1(g). On September 8, 2016, Heil was awarded the right to open a Philly

Pretzel Factory at Amtrak’s 30th Street Station. Accordingly, UC demanded

the release of the escrowed funds.      Soft Pretzel, however, requested UC

execute a release confirming that UC sold its right of first refusal to Heil and

acknowledge that Soft Pretzel released the purchase price. When UC refused

to sign the document and Soft Pretzel continued to withhold payment of the

funds, UC instituted the underlying lawsuit, on August 4, 2017, against Soft

Pretzel and Heil seeking, among other things, recovery of the purchase price.

On September 14, 2017, Soft Pretzel sent UC a check for the full purchase

price. The parties, however, continue to dispute payment of statutory interest

on the purchase price.

      On September 5, 2017, Heil filed preliminary objections claiming

insufficiency in pleading; UC filed an amended complaint on September 26,

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2017. On October 27, 2017, Soft Pretzel filed preliminary objections to UC’s

amended complaint; UC filed a second amended complaint. On November 16,

2017, Soft Pretzel filed preliminary objections to UC’s second amended

complaint seeking to have the court order the parties to mediate the dispute

and, if unsuccessful, to have the matter arbitrated.

      On November 20, 2017, Soft Pretzel filed a petition to compel mediation

and arbitration.   After UC filed a response to Soft Pretzel’s preliminary

objections and a motion opposing its petition to compel mediation/arbitration,

the trial court entered an order dismissing the petition to compel.           In its

Pa.R.A.P. 1925(a) order, the trial court explained its ruling in a footnote:

      It is quite obvious that the controversy in the instant case arose
      from the April 4th agreement and not the Franchise Agreement.
      As a result, the choice of forum is governed by the terms of the
      April 4th agreement – which makes no mention of mediation
      and/or arbitration. Further, it appears that the parties are fighting
      over the payment of statutory interest, as the principal amount
      due has been paid. It might be advisable for the parties to meet
      with a Judge Pro Tem to resolve this matter in a cost-effective and
      expeditious manner.       Alternatively, due to the amount in
      controversy, the arbitration program may be a more appropriate
      forum to resolve this case.

Pa.R.A.P. 1925 Order, 12/15/17, at n.1 (italics added). Soft Pretzel filed a

timely notice of appeal, raising the following issues for our consideration:

      (1) Whether the lower court committed reversible error by
      failing to compel mediation and, if necessary, arbitration where
      the parties’ Franchise Agreement contains provisions requiring the
      parties to first mediate and, if unsuccessful, to arbitrate “all
      disputes and claims relating to [the Franchise Agreement] or any
      other agreement entered into between the parties[.]”

      (2) Whether the lower court committed reversible error in
      denying [the petition] to compel arbitration because the dispute

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       is related to or arises from the Franchise Agreement and/or any
       other agreement (i.e.[,] the oral agreement to act as the escrow
       agent) between appellant and appellee.

Appellant’s Brief, at 4.

       Soft Pretzel argues that the underlying dispute concerns its obligations

to UC under an oral escrow agreement. More specifically, it claims the oral

escrow agreement is within the scope of the broadly worded Franchise

Agreement, and, thus is controlled by the Franchise Agreement3 and the

parties are compelled to mediate/arbitrate the instant legal dispute.        We

disagree.

       Under the Franchise Agreement, “all claims or disputes between UC and

Soft Pretzel” relating to the Franchise Agreement or any other agreement

between UC and Soft Pretzel are first to be submitted to mediation and then,

if unsuccessful, to arbitration.       The language in the Franchise Agreement

clearly indicates that the disputes and claims relate to the parties to the

Agreement, not third-party, non-affiliates, like Heil.          See Franchise

Agreement, 5/22/06, at ¶ 16.2.2. (emphasis added) (“all claims and disputes

____________________________________________

3 A franchise agreement is a contract to be interpreted under contract
principles. Mace v. Atlantic Refining Marketing Corp., 785 A.2d 491, 496
(Pa. 2001). In interpreting the language of a contract, a court attempts to
ascertain the intent of the parties and give it effect. LJL Transp., Inc. v.
Pilot Air Freight Corp., 962 A.2d 639, 647 (Pa. 2009) (citation omitted).
“When the words of an agreement are clear and unambiguous, the intent of
the parties is to be ascertained from the language used in the agreement,
which will be given its commonly accepted and plain meaning.” Id. (citations
omitted). Additionally, in determining the intent of the contracting parties, all
provisions in the agreement will be construed together and each will be given
effect. Murphy v. Duquesne Univ., 777 A.2d 418, 429 (Pa. 2001).

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between UC Twister and Soft Pretzel . . . relating to this Agreement or

any other agreement by and between UC Twister and Soft Pretzel[.]”);

id. at ¶ 16.2.3 (emphasis added) (“all disputes and claims relating to this

Agreement or any other agreement entered into between the parties . . .

shall be settled by arbitration[.]”).

      By contrast, the April Agreement establishes Soft Pretzel’s role as

escrow agent with regard to the Heil-UC right of first refusal for the 30th Street

location. Specifically, the April Agreement states that the purchase price “shall

be made in certified bank check or money order to Soft Pretzel Franchise

Systems, Inc. (“SPFS”) upon execution of Agreement and shall be held in

escrow until the contingency below is satisfied.” April Agreement, 4/4/16, at

¶ 1(c). Moreover, pursuant to the April Agreement, “the Parties irrevocably

and unconditionally acknowledge and agree that any proceeding arising out of

or from, in connection with or as a result of this Agreement or any of the

transactions contemplated hereby, shall be brought exclusively in the courts

of Philadelphia County[.]” Id. at ¶ 5 (emphasis added).

      We agree with the trial court that the April Agreement encompasses the

underlying issue in this lawsuit – namely, the dispute regarding Soft Pretzel’s

failure to tender the statutory interest on the escrowed purchase monies for

Heil’s 30th Street soft pretzel franchise; the lawsuit is not based upon the

franchisor-franchisee relationship between Soft Pretzel and UC set forth in the

Franchise Agreement. While Soft Pretzel may not be a named party to the

April Agreement, the instant dispute clearly “aris[es] out of or from, in

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connection with or [i]s a result of th[e April] Agreement or any of the

transactions contemplated” by it where Soft Pretzel is named as the escrow

agent. Accordingly, the trial court properly denied the petition to compel. The

action was properly brought in the Philadelphia Court of Common Pleas in

accordance with the clear language of the April Agreement’s “Governing Law”

provision. LJL Transp., Inc., supra.

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 6/12/18

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