Court Opinion

ID: 2787350
Source: CourtListenerOpinion
Date Created: 2015-03-19 00:06:51.148808+00
Date Added: 2024-06-11T11:28:42.360389
License: Public Domain

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

ATLANTIC COMMUNITY BANKERS BANK,               IN THE SUPERIOR COURT OF
INC., AND JON EVANS                                  PENNSYLVANIA

                         Appellees

                    v.

CHARLES DANIELS AND IMRAN DALVI

                         Appellants                 No. 635 MDA 2014

               Appeal from the Order Entered March 20, 2014
            In the Court of Common Pleas of Cumberland County
                       Civil Division at No(s): 14-250

BEFORE: BOWES, J., MUNDY, J., and JENKINS, J.

DISSENTING MEMORANDUM BY BOWES, J.:                FILED MARCH 18, 2015

     My learned colleagues in the Majority hold that Executives’ CEPA and

unjust enrichment claims against ACBB and Evans fall outside the scope of

the arbitration provision in their Employment Agreements.      I respectfully

disagree.   I believe that in reaching that conclusion, the Majority has

disregarded the plain language of the arbitration provision and impermissibly

narrowed its scope.      Since I also find there was a valid agreement to

arbitrate, I would reverse and permit the claims to proceed in arbitration.

Hence, I dissent.

     This Court held in Pisano v. Extendicare Homes, Inc., 77 A.3d 651,

654-655 (Pa.Super. 2013), that in reviewing a claim that the trial court

improperly denied arbitration, we employ a two-part test.     See Elwyn v.
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DeLuca, 48 A.3d 457, 461 (Pa.Super. 2012) (quoting Smay v. E.R.

Stuebner, Inc., 864 A.2d 1266, 1270 (Pa.Super. 2004)).             “First, we

examine whether a valid agreement to arbitrate exists.      Second, we must

determine whether the dispute is within the scope of the agreement.”

Pisano, supra at 654. The latter involves a question of law and hence, our

review of the trial court's conclusion is plenary.

      The Majority did not address the first prong since it found the second

prong of the test dispositive.     A reversal requires that both prongs be

satisfied, however. Thus, in support of my belief that ACBB’s petition to stay

arbitration should have been denied, I will address both the validity and the

scope of the arbitration agreement.

      Although ACBB was designated a third-party beneficiary of the

Employment Agreements, I do not find that label controlling herein. ACBB

solicited the services of Executives.         It negotiated and drafted the

Employment Agreements before BITS even existed. Most notably, ACBB was

a signatory to the Employment Agreements. The Agreements conferred not

only rights and benefits upon ACBB, but imposed obligations as well.      For

instance, ACBB was required under the Agreements to provide health and

pension benefits to Executives, as well as all fringe benefit programs and

perquisites that it offered to its own management. When Jon Evans affixed

his signature denoting that ACBB “accepted and agreed [to]” the Executives’

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Employment Agreements, ACBB agreed to arbitrate all disputes arising from

or relating to the Agreements.

        The situation with Jon Evans requires a different analysis. He was not

a signatory to the employment agreements in his individual capacity; he

signed the Agreements both as the Managing Member of ACBB-BITS, LLC

and as President and CEO of ACBB.            However, having concluded that his

principal ACBB is bound by the terms of the arbitration clause, Mr. Evans, in

his capacity as ACBB’s President and CEO, is similarly bound as ACBB’s

agent.    While this precise issue appears to be one of first impression in

Pennsylvania, several federal circuit courts have applied the parties’

agreement to arbitrate claims against agents or entities related to the

signatories. See Pritzker v. Merrill Lynch, Pierce, Fenner, & Smith, 7
F.3d 1110, 1122 (3rd Cir. 1993) (because a principal is bound under the

terms     of   a   valid   arbitration   clause,   its   agents,   employees,   and

representatives are also covered under the terms of such agreements.).

        In Arnold v. Arnold Corp., 920 F.2d 1269, 1281-82 (6th Cir. 1990),

the court enforced an arbitration agreement entered into by the corporation.

Since the non-signatory individual defendants were all either officers of the

defendant corporation or members of its board of directors who were alleged

to have committed wrongful acts in their running of the corporation, the

court held that the arbitration clause extended to them as corporate agents.

See also Letizia v. Prudential Bache Securities, 802 F.2d 1185, 1187-88

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(9th Cir. 1986).   I find this reasoning sound.    Since my review of the

demand for arbitration reveals that the claims against Mr. Evans stem from

his conduct as ACBB’s CEO and President with regard to Executives and

BITS, I would hold that ACBB’s agreement to arbitrate extends to Mr. Evans

as its corporate agent.

      With regard to the second prong, I disagree with the Majority’s

interpretation of the scope of the arbitration agreement.    The arbitration

provision at issue was contained in the Executives’ Employment Agreements

and provided in pertinent part:

            20. Arbitration. Any dispute or controversy arising out
      of or relating to this Agreement or any claimed breach
      hereof shall be settled, at the request of either party, by
      an arbitration proceeding conducted in accordance with the
      rules of the AAA, with the award determined to be appropriate
      by the arbitrator therein to be final, non-appealable and binding
      on the parties hereto, and with judgment upon such award as is
      rendered in any such arbitration proceeding available for entry
      and enforcement in any court having jurisdiction of the parties
      hereto . . . . .

Employment Agreements at 13, ¶20 (emphasis is supplied).

      Thus, the issue is whether Executives’ claims arise out of or relate to

the Employment Agreements or a breach of the Agreements.          Instead of

determining whether the dispute related to the Employment Agreements,

the Majority limited its inquiry to whether the claims were related to ACBB’s

duties and obligations under the Employment Agreements. It concluded that

since the CEPA retaliation claim “does not arise out of, relate to or claim a

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breach of covenants in the employment agreements that are intended to

protect ACBB” or “ACBB’s duty under the employment agreements to

provide [Executives] with the same health, pension and fringe benefits that

it provides to its own management,” it falls outside the scope of the

arbitration agreement. Majority Memorandum at 13. Additionally, it found

that the unjust enrichment claim arose from the operating agreement, not

the Employment Agreements, and had “nothing to do with the covenants in

the employment agreements that protect ACBB or with ACBB’s duty under

the employment agreements to provide [Executives] with health, pension

and fringe benefits.”   Id. at 14.   With regard to Mr. Evans, the Majority

holds that since, he did not possess any individual rights or obligations under

the Employments Agreements, any claims against him fell outside the scope

of the arbitration agreement.

      I believe the arbitration clause compels us to determine whether the

“dispute or controversy” is one “arising out of or relating to this

[employment] agreement or any claimed breach thereof,” and that the

Majority instead improperly narrowed its inquiry to whether the claims relate

to ACBB’s covenants and obligations under the Employment Agreements.

Furthermore, the Majority offers no support for such an interpretation of the

arbitration clause.

      I would point out that similarly-worded arbitration clauses have been

labeled “unlimited” and our courts have held that any claims implicating the

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contract can be compelled to arbitration, whether they sound in contract or

tort.    See Dodds v. Pulte Home Corporation, 909 A.2d 348, 351

(Pa.Super. 2006) (broadly defining a claim subject to arbitration as any

controversy or dispute related to purchase of home);             see also Smay,

supra (interpreting broadly "Any controversy or Claim arising out of or

related to the Contract" to include all claims arising from the contract

regardless of whether the claim sounds in tort or contract).

        Executives seek to arbitrate whistleblower and unjust enrichment

claims against ACBB and Jon Evans, which stem from their termination as

CEO and CFO of BITS, ACBB’s subsidiary. The substance of their claims is

that ACBB manipulated the sale of membership units in BITS, which reduced

the latter’s operating capital and their compensation in the form of salaries,

bonuses, and profit-sharing while unjustly enriching ACBB and Jon Evans.

See Demand for Arbitration at 5-6.           Such claims relate to Executives’

compensation under the Employment Agreements.                    See Employment

Agreements at 5-7.

        When   Executives   revealed    their   intention   to    expose   ACBB’s

noncompliance with conditions imposed by the Pennsylvania Department of

Banking and the Federal Reserve Bank for approval of the formation of BITS,

Executives were fired in retaliation.        Whistleblower claims for wrongful

termination relate to breach of the Employment Agreements.            So, too, an

allegation that ACBB amended the BITS operating agreement to permit

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ACBB to retain a higher percentage of BITS’s net income which constituted

constructive termination of Executives, is related.      Id. at 3; see also

Demand for Arbitration at 6 (“The Employment Agreements expressly

provide that any amendment to Section 27 of the Operating Agreement

allowing the Managing Member to retain more than 10% of annual net

income in reserve would constitute an event of constructive termination.”).

      I would therefor reverse the trial court’s grant of ACBB’s petition and

permit this matter to proceed in arbitration. For all of the foregoing reasons,

I respectfully dissent.

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