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HomeMy WebLinkAbout2007-6274 CivilVARISH CONSTRUCTION, INC., Plaintiff V. THE COMMONS AT PARKER SPRINGS, INC., K&I CONTRACTORS, INC., and PSI PUMPING SOLUTIONS, INC., Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 07-6274 CIVIL TERM IN RE: OPINION PURSUANT TO PA. R.A.P. 1925 OLER, J., December 5, 2008. In this construction case, Plaintiff Varish Construction, Inc. ("Varish") appeals a June 23, 2008, order of this court denying its motion to compel arbitration.' Varish initiated the present action by the filing of a complaint in the Court of Common Pleas of Cumberland County on October 26, 2007, against three defendants — the Commons at Parker Springs ("Commons"), K&I Contractors, Inc. ("K&I"), and PSI Pumping Solutions, Inc. ("PSI"). In conjunction with the action, Varish also filed a motion for entry upon property of Defendant Commons, and a Rule was issued by the court pursuant to the motion. The defendants in the matter jointly filed preliminary objections to Varish's complaint. Varish filed a response to the preliminary objections and also filed a ' Plaintiff's present appeal from this court's order of June 23, 2008, was initiated in the Superior Court on August 4, 2008, as a petition for review of this court's failure to amend the order, pursuant to Section 702(b) of the Judicial Code, to indicate that it involved a substantial ground for difference of opinion. See Petition for Permission To Appeal, filed August 4, 2008, No. 28 MDM 2008 (Pennsylvania Superior Court). Inasmuch as the June 23, 2008, order was appealable as of right pursuant to Section 7320(a)(1) of the Judicial Code, the Superior Court issued an order indicating that the petition for review would be treated as a notice of appeal. Order of Court, September 19, 2008, No. 28 MDM 2008 (Pennsylvania motion to compel arbitration with respect to Defendant Commons only. After a hearing on the motion to compel arbitration, the court issued an order denying the motion. The bases for the appeal from this order by Varish have been expressed in its statement of matters complained of on appeal as follows: 1. Plaintiff Varish Construction, Inc. asserts that its claims against Defendant The Commons at Parker Springs, Inc. should be submitted to arbitration pursuant to the terms of the parties' contract. 2. The parties entered into a contract on June 21, 2006 to perform site work at a location in North Middleton Township, Cumberland County, Pennsylvania. 3. The contract between the parties contains an arbitration provision on page 2 which provided that "All disputes hereunder shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association." 4. Varish initiated this litigation when it filed a Complaint on or about October 25, 2007 while simultaneously filing a Motion for Entry upon Property of a Person to inspect the job site under the control of the Commons at Parker Springs. 5. To date, the Commons at Parker Springs has engaged in no discovery and responded to the Complaint by filing Preliminary Objections which are still pending. 6. Varish will argue on appeal that it's breach of contract, unjust enrichment, and quantum meruit claims should have been submitted to arbitration pursuant to the terms of the parties' Contract and that its Motion to Compel Arbitration should have been granted. 7. Varish will also argue on appeal that it did not waive its' right to compel arbitration merely by simultaneously filing a Complaint and Motion for Entry upon the Property of a Person in this matter. A. Varish's breach of contract, unjust enrichment, and quantum meruit claims should be submitted to arbitration pursuant to the terms of the parties' Contract. Superior Court). The timeliness of the appeal under these circumstances is beyond the scope of this opinion. 2 8. Not permitting arbitration in this case is contrary to established Pennsylvania law which states that parties are free to draft their own contracts; that the courts will interpret those contracts and enforce them as created; and that contracts that provide for arbitration are valid, enforceable and irrevocable. Mendelson v. Shrager, 248 A.2d 234, 235 (Pa. 1968); Borough of Ambridge Water Authority v. Columbia, 328 A.2d 498, 500 (Pa. 1974). B. Varish did not waive the arbitration clause in the parties' Contract by filing a Complaint and a Motion for Entry upon the Property of a Person. 9. The Rules of the American Arbitration Association ("AAA"), which govern the parties' contract, provide that a judicial proceeding by a party relating to the subject matter of the arbitration does not waive a parties' right to arbitrate. 10. Furthermore, Pennsylvania law is clear that filing a Complaint does not automatically waive a party's right to arbitrate, particularly when no discovery was done. Keystone Tech. Group v. Kerr Group, Inc., 825 A.2d 1223, 1227 (Pa. Super. 2003). This opinion in support of the order denying Varish's motion to compel arbitration is written pursuant to Pennsylvania Rule of Appellate Procedure 1925(a). STATEMENT OF FACTS The basic allegations of Plaintiff's complaint may be summarized as follows: Defendant Commons, as the owner of a construction project, retained Varish to perform site work at a location in North Middleton Township, Cumberland County, Pennsylvania.2 The parties entered into a written contract on June 21, 2006, whereby Commons agreed to pay Varish $650,545.00 in exchange for the timely performance of the site preparation.3 In addition to the work provided for under the terms of the contract, 2 Plaintiff Varish Construction, Inc. Complaint, ¶7, filed October 26, 2007 (hereinafter Complaint). s Complaint, ¶¶7-8- 3 Varish was requested to perform additional work at the site by both Commons and K&I, the contractor hired by Commons to construct the buildings at the location.4 The additional work performed by Varish was accounted for through written invoices with K&I.5 Pursuant to its contract with Commons, Varish contracted to purchase a sanitary pump for the location from PSI.6 However, before the pump was installed, Commons terminated the contract with Varish by a letter dated September 17, 2007.7 Thereafter, PSI contacted Commons and offered to install the pump station itself.$ The contract between Varish and Commons included the following provision: "All disputes hereunder shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association."9 Despite this provision, on October 26, 2007, Varish filed a complaint in the Court of Common Pleas of Cumberland County against three defendants - Commons, K&I and PSI. In its complaint, Varish asserted breach of contract, unjust enrichment and quantum meruit claims against Commons and K&I, and a tortious interference with contract claim against PSI. 10 The first three claims were brought against Commons and K&I Jointly; 11 the fourth claim was brought against 4 Complaint, ¶9. s Complaint, ¶9. 6 Complaint, ¶14. Complaint, ¶16. s Complaint, ¶45. 9 See Exhibit A as attached to Complaint. 10 Complaint, ¶¶23-49 " See Complaint, ¶¶24-29 ("Varish and [Commons] and K&I Contractors entered into the Contract whereby (a) Varish agreed to perform the work for the [Commons] site; and (b) [Commons] and K&I Contractors agreed to pay Varish for the work"), 31-37 ("Defendants requested Varish to perform additional excavation and site work at the [Commons] location at the direction and instruction of K&I 11 PSI alone, but directly related to the contract between Varish and Commons. 12 Varish alleged that the total amount owed by Defendants, "calculated by adding the unpaid invoices to the contract price, lost profits, as well as cost for materials purchased, and costs incurred to remove and store the materials," was $653,372.28.13 In paragraph five of its complaint, Varish asserted that the Court of Common Pleas of Cumberland County had jurisdiction over the parties and subject matter of the dispute. 14 The complaint did not reference the arbitration clause contained in the contract between Varish and Defendant Commons. 15 Concurrently with the complaint, Varish filed a motion for entry upon property of a person. 16 Approximately one month later, on November 28, 2007, Varish filed a praecipe to withdraw the motion for entry. 17 On November 29, 2007, all three defendants jointly filed preliminary objections to Varish's complaint.18 On December 14, 2007, Plaintiff filed a mechanics' lien claim in this court against Defendant Commons.19 On Construction"), 39-41 ("Defendants would be unjustly enriched if they were permitted to retain the benefit from the work performed by Varish without paying the monies owed to Varish for said work.") 12 See Complaint, ¶¶43-48. " Complaint, ¶21. 14 Complaint, ¶5. " See Complaint. 16 Plaintiff's Motion for Entry upon Property of a Person, filed October 26, 2007. 17 Praecipe To Withdraw Plaintiff's Motion for Entry upon Property of a Person, filed November 28, 2007. " Defendant's Preliminary Objections to Plaintiff's Complaint, filed November 29, 2007. 19 See Mechanics' Lien Claim, No. 07-7500 Civil Term (Cumberland County), filed December 14, 2007. It appears that at least a portion of the amount of this lien relates to the contract at issue herein between Plaintiff and Commons. Id. 5 February 21, 2008, Varish filed a response to the preliminary objections .20 On the same day, Plaintiff also filed a motion to compel arbitration with respect to Defendant Commons only.21 On June 20, 2008, a hearing was held on Varish's motion to compel arbitration. At the hearing, Varish argued that it had not waived its right to arbitration by filing the complaint in this court .22 Varish claimed that it filed the complaint primarily to gain entry onto the premises of Commons to conduct an inspection ,23 and also because it needed to file a complaint against the other two defendants, who were not parties to the contract and therefore not subject to the arbitration provision.24 Varish further argued that Commons had not been prejudiced by the initiation of the action in this court by Varish because the activity of Commons in the case had been limited to the filing of preliminary objections to the complaint ,25 and because Commons had not incurred additional costs inasmuch as all three defendants were being represented by the same law firm.26 20 Plaintiff's Response to Defendant's Preliminary Objections to Plaintiff's Complaint, filed February 21, 2008. 21 Plaintiff's Motion To Compel Arbitration with Respect to Co -Deft the Commons at Parker Springs, Inc., filed February 21, 2008. 22 N.T. 9. 23 N.T. 6. 24 N.T. 6, 9. 2s N.T. 9. 26 N.T. 10-11. 31 Commons asserted that Varish had availed itself of the judicial process and, in doing so, waived its right to arbitration.27 Commons argued further that Varish chose to file its complaint against all three defendants collectively, thereby waiving its right to arbitration, rather than filing a separate action against the two defendants not subject to the arbitration provision. 28 Commons claimed that it had been prejudiced by the filing of the complaint as Commons was required to perform an investigation into the allegations contained in the complaint and to file preliminary objections .29 Furthermore, Commons argued that, if Varish's motion were granted, two actions arising out of the same set of facts would proceed in different forums, which could lead to inconsistent results.30 Following the hearing, the court issued an order denying the motion on June 23, 2008.31 DISCUSSION Statement of Law As a matter of public policy, Pennsylvania courts favor the settlement of disputes by arbitration; nevertheless, the "right to enforce an arbitration clause can be waived." Goral v. Fox Ridge, Inc., 453 Pa. Super. 316, 321, 683 A.2d 931, 933 (1996). A waiver of the right to proceed to arbitration may be expressly stated or it may be inferred from a "party's undisputed acts or language so inconsistent with a purpose to stand on the 27 N.T. 16. 2s N.T. 14. 29 N.T. 17. so N.T. 17. 31 Order of Court, dated June 23, 2008. 7 contract provisions as to leave no opportunity for a reasonable inference to the contrary. Id. (quoting Samuel J. Marranca Gen. Contracting Co., Inc. v. Amerimar Cherry Hill Assocs. Ltd. Partnership, 416 Pa. Super. 45, 49, 610 A.2d 499, 501 (1992)). To establish whether or not the right to arbitration has been waived, a court must initially determine if the party, by virtue of its conduct, has availed itself of the judicial process. Moscatiello Construction Co. v. Pittsburgh Water and Sewer Authority, 167 Pa. Commw. 508, 513-14, 648 A.2d 1249, 1252 (1994), appeal denied, 540 Pa. 608, 655 A.2d 995 (1995). "Where a party has every opportunity to assert its right to arbitration, yet clearly indicates its preference for judicial proceedings through the party's participation, that party can no longer assert a right to arbitration. ,32 Castle Cheese, Inc. v. Sadler, 81 Pa. D. & C. 4th 157, 159, 2007 WL 1797513 (Pa. Com. Pl.) (citing Samuel J. Marranca General Contracting Co. Inc. v. Amerimar Cherry Hill Assocs. Ltd. Partnership„ 416 Pa. Super. 45, 50-51, 610 A.2d 499, 501-502 (1992). Waiver "should not be lightly inferred and unless one's conduct has gained him an undue advantage or resulted in prejudice to another[,] he should not be held to have relinquished the right." Kwalick v. Bosacco, 329 Pa. Super. 235, 238, 478 A.2d 50, 52 (1984). Accordingly, the "mere filing of a complaint or answer without resulting sz Generally it is the defendant who seeks to invoke and enforce an arbitration provision in a contract after having been sued by the plaintiff. Consequently, most of the cases dealing with waiver of the right to arbitration are ones in which the defendant has belatedly asserted the applicability of an arbitration clause after arguably availing himself to the judicial process. The present case is therefore atypical as Varish is both the plaintiff in the action and the party that now seeks to avoid the judicial process. But see Keystone Technology Group v. Kerr Group, Inc. 2003 PA Super. 199, 824 A.2d 1223; Kwalick v. Bosacco, 329 Pa. Super. 235, 238, 478 A.2d 50, 52 (1984). prejudice to the objecting party will not justify a finding of a waiver of the right to arbitration." Id.; 33 see Oxford Valley Pets, Inc. v. Docktor Pet Centers, Inc., Pa. D. & C.3d 558, 561-62 (Phila. 1981). Thus, prejudice to the party asserting waiver must be demonstrated. Goral v. Fox Ridge, Inc., 453 Pa. Super. 316, 322, 683 A.2d 931, 933, (1996). Application of Law to Facts In the present case, where (a) Plaintiff Varish initiated the action against Defendant Commons, inter alia, without reference to the arbitration clause contained in their contract, (b) the action against Defendant Commons included claims for some work not covered by the contracts, (c) the action involved interconnected claims against several defendants which could result in inconsistent results if tried separately, (d) Plaintiff subjected Defendant Commons to a motion for court-ordered entry upon its property, (e) Plaintiff elicited preliminary objections from all Defendants, including Commons, (f) Plaintiff responded to the preliminary objections, (g) Plaintiff filed a mechanics' lien against Defendant Commons in this court, and (h) Plaintiff waited until four months after the commencement of the instant action to attempt to avoid the judicial process it had initiated against Defendant Commons, the court was of the view that Plaintiff, through its ss In Kwalick, the Pennsylvania Superior Court stated that a plaintiff "is not automatically deemed to have waived his rights to proceed to binding arbitration as set forth in [the] contract" merely because he filed a complaint in the court of common pleas. Rather, the Court found that the "mere filing of a complaint or answer without resulting prejudice to the objecting parry will not justify a finding of a waiver of the right to arbitration. The court concluded that the defendant had not shown any prejudice to him or undue advantage gained by the plaintiff, and, therefore, affirmed the trial court's order granting plaintiff's motion to compel arbitration. Kwalick v. Bosacco, 329 Pa. Super. 235, 238, 478 A.2d 50, 52 (1984) (emphasis added). 9 conduct, waived its right to pursue arbitration in the course of availing itself of the judicial process. For the foregoing reasons, the court issued the order denying Plaintiff's motion to compel arbitration of its claims against Defendant Commons. Peter M. Good, Esquire Darryl J. Liguori, Esquire River Chase Office Center Third Floor 4431 North Front Street Harrisburg, PA 17110-1778 Attorneys for Plaintiff Michael D. Reed, Esquire 3401 North Front Street P.O. Box 5950 Harrisburg, PA 17110-0950 Attorney for Defendant 10 BY THE COURT, J. Wesley Oler, Jr., J.