Court Opinion

ID: 9732203
Source: CourtListenerOpinion
Date Created: 2023-08-26 16:11:30.392399+00
Date Added: 2024-06-11T15:23:11.739117
License: Public Domain

DISSENTING OPINION
BY Judge SMITH-RIBNER.
I respectfully dissent because the dispute in this case should be submitted to arbitration in accordance with the arbitration provision of the parties’ agreement. The majority affirms the order of the Court of Common Pleas of Lackawanna County that denied Appellants’ motion for summary judgment in which they sought an order directing the City of Scranton, Appellee, to proceed to arbitration of their dispute before the American Arbitration Association. The issue involves a provision in the parties’ agreement that requires them to submit contract disputes to binding arbitration, instead of pursuing some other legal remedy, and whether the question of the arbitrability of the dispute should be decided in the first instance by the arbitrator or by the trial court where the City claims that the agreement itself is void and unenforceable. The dispute arose out of the City’s breach of the agreement requiring Appellant to perform certain audit services in connection with health insurance claims paid by the City through Blue Cross.
Based on Pennsylvania Superior Court decisions McNulty v. H & R Block, Inc., 843 A.2d 1267 (Pa.Super.), appeal denied, 578 Pa. 709, 853 A.2d 362, cert. denied, — U.S.-, 125 S.Ct. 667, 160 L.Ed.2d 497 (2004), and Shadduck v. Christopher J. Kaclik, Inc., 713 A.2d 635 (Pa.Super.1998), the majority concludes that “the issue of whether a particular dispute falls within a contractual arbitration provision is a matter of law for a court to decide.” Op. at 880. The majority therefore has ruled that the trial court did not err when it decided that it first must determine the validity of the agreement and then held that the agreement was not valid because the City did not follow specific procedures that were required before the City could enter into an agreement. The majority further concludes that Appellants may not proceed on theories of ratification or estoppel to validate their agreement.
I disagree with the majority’s position that the dispute should not be submitted to the arbitrator under the agreement’s bind*883ing arbitration clause where the Pennsylvania Supreme Court has expressly held that parties should be bound by contract provisions requiring the arbitration of their disputes and that they should not be allowed to avoid the consequences thereof by challenges that question the validity of the contract itself. In Borough of Ambridge Water Authority v. Columbia, 458 Pa. 546, 328 A.2d 498 (1974), the Supreme Court clarified that the water authority in that case had made no challenge to its capacity to enter into the employment agreement providing for common law arbitration of disputes, and the court noted that the parties operated under the agreement for more than 3 1/2 years. It ultimately concluded that the arbitration provision in the contract was framed in broad language, meaning that the parties intended the scope of the submission of their disputes to be unlimited. The court refused to allow the water authority to frustrate the parties’ intention to arbitrate by making belated attacks upon the validity of the contract. That is precisely the situation here.
The Supreme Court cited with approval its decision in Borough of Ambridge Water Authority in Borgia v. Prudential Ins. Co., 561 Pa. 434, 750 A.2d 843 (2000), which involved the interpretation of a clause in an insurance policy providing that in the event of a dispute as to policy coverage or amounts payable either party might make a written demand for arbitration. The Supreme Court reversed the Superior Court’s decision in Borgia that the injured appellant was not a “covered person” under the policy and that, as a result, there was no agreement to arbitrate between the appellant and Prudential. Citing with approval its prior decision in Borough of Ambridge Water Authority, the Supreme Court stated that the issue in Borgia was whether the appellant’s claim of “covered person” status and his entitlement to demand arbitration was itself an arbitrable issue. The Supreme Court held that the arbitration clause in Prudential’s policy must be construed broadly whereby the issue involved was to be determined by the arbitrator and not by the court.1 It observed that interpreting the arbitration agreement in that manner comported with the settled principle that public policy favors arbitration.
Finally, in McCarl’s, Inc. v. Beaver Falls Municipal Authority, 847 A.2d 180 (Pa. Cmwlth.2004), this Court reversed a trial court’s order granting summary judgment to a contractor who claimed payment of sums due for certain work performed under contract with the authority. Once the contractor filed suit, the authority filed preliminary objections seeking dismissal of the complaint and requesting the trial court to require arbitration under the arbitration clause of the original contract. This Court reiterated the principle that settlement of disputes by arbitration outside of the court system is favored. Because the arbitration clause in McCarl’s, Inc. was never canceled or otherwise nullified by subsequent agreements between the parties they were bound by the arbitration clause, and any remaining disputes had to be submitted to the arbitrator in accordance with that clause.
*884In the present controversy, there is no legal basis for looking beyond the clear language of the arbitration provision in the parties’ agreement. They are to arbitrate any disputes that arise out of the auditing contract. At that time the City may challenge the validity of the contract itself, and based on the evidence presented the arbitrator can issue a ruling that either party may appeal if aggrieved. It is not inconceivable that once the parties submit their dispute to arbitration, as required under the contract, this dispute can be settled without court intervention. Otherwise, the majority’s decision will effectively frustrate the whole notion of dispute resolution via a mechanism chosen by the parties to an agreement.2

. Compare Township of Sugarloaf v. Bowling, 563 Pa. 237, 759 A.2d 913 (2000) (holding that arbitrators and not the courts had authority in the first instance to determine arbi-trability of a dispute arising under the Act known as Act 111, Act of June 24, 1968, P.L. 237, 43 P.S. §§ 217.1-217.10, just as in disputes arising under the Public Employe Relations Act, Act of July 23, 1970, P.L. 563, as amended, 43 P.S. §§ 1101.101-1101.2301, and reiterating that "it was folly” to permit full preliminary bouts in the courts over issues of an arbitrator’s jurisdiction).

. The majority also upholds the trial court’s decision that the agreement was not ratified by the City and that the City was not estopped from denying the validity of the agreement. These are issues for the arbitrator to decide during arbitration of the dispute when and if the City raises the issues. I disagree that under the facts of this case that the City’s actions did not amount to a ratification of the agreement.