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HomeMy WebLinkAbout2006-710 WHIRLPOOL CORPORATION, : IN THE COURT OF COMMON PLEAS OF : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, : : vs. : : PENSKE LOGISTICS, INC., PIZZUTI : EQUITIES, INC., EXXCEL CONTRACT : MANAGEMENT, INC., : Defendants, : : NO. 06-710 CIVIL TERM vs. : : FABCON, LLC, t/d/b/a, FABCON, : INCORPORATED, : Additional Defendant, : : vs. : : CIVIL ACTION WESTFIELD STEEL, INC., : JURY TRIAL DEMANDED Additional Defendant. IN RE: MOTION OF DEFENDANT WESTFIELD STEEL, INC. FOR PARTIAL SUMMMARY JUDGMENT BEFORE HESS, P.J. AND MASLAND, J. OPINION AND ORDER HESS, P.J., June , 2011. Defendant Westfield Steel, Inc. (hereinafter “WSI”) has filed a Motion for Partial Summary Judgment as to the issue of liability of Defendant Penske Logistics, LLC (hereinafter “Penske”) on WSI’s cross-claims against Penske, insofar as it is the contention of WSI that Penske is either alone liable to Plaintiff Whirlpool Corporation (hereinafter “Whirlpool”), jointly and severally liable to Plaintiff Whirlpool, or, in the alternative, liable to WSI for contribution and/or indemnity. (Additional Defendant Westfield Steel, Inc.’s Motion for Partial Summary Judgment, filed Jan. 27, 2011, hereinafter “WSI Motion for Partial Summary Judgment”). Following an arbitration which occurred between Penske and Whirlpool, wherein the arbitrator found Penske to be liable to Whirlpool in a certain capacity, WSI filed the Motion for Partial Summary Judgment sub judice, wherein WSI seeks a declaration and judgment that Penske is collaterally estopped from now asserting that it is not liable in any respect to Plaintiff Whirlpool. The facts of this case may be summarized as follows. On February 3, 2006, Plaintiff Whirlpool filed a complaint against Defendants Penske, Pizzuti Equities, Inc., and Exxcel Contract Management, Inc. seeking to recover damages resulting from a partial warehouse roof collapse which occurred on February 6, 2004. (Complaint, filed Feb. 3, 2006). In its complaint, Whirlpool alleged that “flaws in the design, construction and materials used in the construction of the Building, combined with the accumulation of ice and snow on the roof, caused a portion of the roof to collapse, causing substantial damages to property owned by Whirlpool.” (Complaint, ¶ 25). With regard to Penske, the complaint alleged that, pursuant to a “Warehouse and Transportation Services Agreement” between Penske and Whirlpool, Penske had the responsibility of, inter alia, removing snow and ice from the building’s roof when necessary, citing structural safety as a reason for the roof maintenance necessity. (Complaint, ¶ 21). Also contained in the “Warehouse and Transportation Services Agreement” was an arbitral clause providing for arbitration as the means of dispute resolution between Whirlpool and Penske. (Complaint, Ex. C). As a result, Whirlpool filed a Motion to Proceed with Arbitration and Stay the Proceedings Against Defendant Penske. (Whirlpool Corp.’s Motion for Order to Proceed with Arbitration and Stay Proceedings Against Defendant Penske Logistics Inc. Pursuant to 42 Pa.C.S. 7304(d), filed Mar. 21, 2006). Penske filed its own Motion to Compel Arbitration and to dismiss the complaint against them with prejudice. (Motion to Compel Arbitration and Dismiss with Prejudice, filed Mar. 28, 2006). A rule to show cause was entered on each of these motions, and a consent order was entered which stayed the action as to Penske and directed Penske and Whirlpool to proceed with arbitration. (Order of Court, Apr. 17, 2006). The case, however, 2 remained pending, and further claims and cross claims were filed by the additional parties. On July 17, 2006, Defendant Fabcon, LLC filed a Praecipe for a Writ to Join Westfield Steel as an additional defendant. (Praecipe to Issue Writ to Join Additional Defendant Westfield Steel, Inc. as Additional Defendant, filed July 17, 2006). The terms of the “Warehouse and Transportation Services Agreement” which contained the arbitral clause providing for arbitration as the means of dispute resolution between Whirlpool and Penske are fundamental to the motion sub judice. That agreement provided for disputes between the parties to be resolved by an arbitrator who was to be selected by Resolute Systems, LLC. (Complaint, Ex. C). By selecting Resolute Systems, LLC as the arbitral institution, the parties thereby incorporated the Resolute Systems Commercial Arbitration Rules into their agreement. Rule 23 of those rules provides as follows: 23. Scope of Award The parties agree that any decision rendered by the arbitrator is conclusive only as to the matters being adjudicated in said arbitration, pertaining to the parties present. The decision of the arbitrator is not res judicata nor will it have collateral estoppel effect as to the same or similar issues in companion claims or actions arising out of the incident, which is the subject of said arbitration. (Response of Defendant Penske Logistics, LLC to the Motion of Westfield Steel, Inc. for Partial Summary Judgment, Ex. A). The arbitration between Penske and Whirlpool was conducted, and on March 31, 2010 an award was rendered by the arbitrator. (WSI Motion for Partial Summary Judgment, Ex. 1). That award contained, inter alia, the following findings: (1) that Penske had a duty to remove ice and snow from the warehouse roof; (2) that the warehouse roof would not have collapsed absent the load of ice and snow; (3) that much of the ice and snow was there prior to February 5, 2004 because Penske failed to remove it; and (4) that Penske’s failures in several regards constituted a breach of the Warehouse Transportation and Services Agreement and were at least a concurrent 3 cause of the roof collapse on February 6, 2004. (WSI Motion for Partial Summary Judgment, ¶ 14, Admitted in Response of Defendant Penske Logistics, LLC to the Motion of Westfield Steel, Inc. for Partial Summary Judgment, filed Feb. 25, 2011, ¶ 14 (admitting that WSI correctly cited portions of the written opinion of the arbitrator); see also WSI Motion for Partial Summary Judgment, Ex. 1). The arbitrator found Penske to be liable to Whirlpool for damages resulting from the partial roof collapse and awarded to Whirlpool a sum of $1,723,861.48, plus prejudgment interest dating back to July 13, 2004. (WSI Motion for Partial Summary Judgment, Ex. 1, 13). Furthermore, Whirlpool also claimed $466,985.00 worth of miscellaneous damages against Penske. The arbitrator found there to be insufficient documentation to support this claim and denied Whirlpool’s claim for these damages. (Motion for Partial Summary Judgment, Ex. 1). Subsequent to the rendering of the arbitral award, Penske filed responsive pleadings in the still pending matter. (Reply of Penske Logistics, LLC to the Crossclaim of Defendant Fabcon, LLC, filed June 3, 2010; Reply of Pensle Logistics, LLC to the Crossclaim of Defendant Pizzuti Equities, Inc, filed June 3, 2010; Answer with New Matter and Crossclaim of Defendant Penske Logistics, LLC to Plaintiff’s Complaint, filed June 3, 2010). Despite the arbitral award and judgment against Penske, contained within these responsive pleadings was what amounted to denials by Penske of any and all responsibility for the roof collapse. (Answer with New Matter and Crossclaim of Defendant Penske Logistics, LLC to Plaintiff’s Complaint, ¶¶ 12-13) (“Answering defendant did not cause the roof in question to collapse, in whole or in part.” “Answering defendant could neither reasonably foresee that the roof in question would collapse, nor could they prevent the roof from collapsing.”). (See also, Id. at ¶ 19) (“Any damages which the plaintiff alleges it has suffered are due to the actions of third parties for which answering defendant cannot be held responsible.”). Furthermore, Penske filed crossclaims against the other defendants asserting that each is alone liable to Whirlpool, or, in the alternative, that each is 4 liable over to Penske by way of contribution and/or indemnification, including counsel fees and costs of litigation. (Answer with New Matter and Crossclaim of Defendant Penske Logistics, LLC to Plaintiff’s Complaint). WSI has filed the motion sub judice asserting that, as a result of the above-described arbitral award, the “considerations of judicial economy and the legal doctrine of collateral estoppel preclude Penske from now asserting (as it has in its recently-filed responsive pleadings) that it is not liable in any respect to Whirlpool (and/or to WSI on its cross claim) concerning the warehouse partial roof collapse on February 6, 2004.” (WSI Motion for Partial Summary Judgment, ¶ 20). For these reasons, WSI has moved this court for a ruling that that certain findings of the arbitrator will be treated as established in the above-captioned matter and given preclusive effect as against Penske and Whirlpool. (WSI Motion for Partial Summary Judgment). Furthermore, WSI does not yet seek a judgment that Penske is precluded from presenting evidence against other defendants and/or additional defendants in an attempt to establish joint liability or an allocation of a degree of fault; rather, WSI seeks to preclude Penske from now asserting a complete lack of fault in the still pending action as a result of the arbitration and award rendered by Resolute Systems, LLC. (WSI Motion for Partial Summary Judgment). Finally, WSI seeks a judgment against Whirlpool that it is similarly estopped from relitigating its entitlement to $466,986.00 worth of “miscellaneous damages” asserted against Penske in the arbitration. (WSI Motion for Partial Summary Judgment). Collateral estoppel is a doctrine also known as issue prelusion, and it operates to preclude a litigant from raising or re-litigating an issue which has previously been determined. McArdle v. Tronetti, 426 Pa. Super. 607, 615, 627 A.2d 1219, 1223 (1993). The doctrine applies if: (1) the issue decided in the prior case is identical to the one presented in the later case; (2) there has been a final judgment on the merits; (3) the party against whom the plea is asserted was a party or in privity with a party in the prior case; (4) the party or person privy to the party against whom 5 the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding; and (5) the determination in the prior proceeding was essential to judgment. Id. (citing Melat v. Melat, 411 Pa. Super. 647, 653-54, 602 A.2d 380, 384 (1992)); see also City of Pittsburgh v. Zoning Board of Adjustment of Pittsburgh, 522 Pa. 44, 55, 559 A.2d 896, 901 (1989). Collateral estoppel also applies in the context of arbitration. In Pennsylvania, the general rule is that the factual and legal findings resulting from an arbitration will be given preclusive effect in subsequent civil litigation so long as the elements of collateral estoppel are satisfied. Incollingo v. Maurer, 394 Pa. Super. 352, 356-57, 575 A.2d 939, 940-41 (1990). Furthermore, the doctrine of collateral estoppel will not apply in the context of an arbitration and subsequent litigation wherein the parties to the arbitration have contractually agreed that any arbitration or arbitral award between them will not later operate to provide a preclusive effect in subsequent litigation. Muse v. Cermak, 428 Pa. Super. 199, 204, 630 A.2d 891, 893 (1993) (“Where the terms of an arbitration agreement limit the binding effect of the award in another proceeding, we must honor those terms as part of the agreement between the parties.”). Because arbitration is fundamentally a creature of contract law, parties to a contract may agree that an arbitration will not have the effect of precluding those parties from raising or re-litigating an issue which has previously been determined in an arbitration. Id.; see also Frog, Switch & Mfg. Co. v. Pennsylvania Human Relations Commn, 885 A.2d 655, 661 (Pa. Cmwlth. 2005). An issue arises, however, in the context of multi-party disputes wherein two parties to the action have contractually agreed not only to arbitrate any disputes between them, but also that the arbitration between them would not be afforded a preclusive effect in subsequent litigation between them. The remaining parties, not being in privity of contract with those who agreed to arbitrate, are left with the question of whether or not the legal and factual findings arising out of the arbitration will be given preclusive effect as to them. In Muse, the Superior Court addressed 6 the issue of the preclusive effect of an inter-company arbitration on a subsequent litigation in a situation involving a motorist who was injured in a two-car collision and who then brought an action for personal injury against the other driver and his employer. Muse, 428 Pa. Super. at 201-02. The insurance carriers of the parties to the collision disputed liability for purposes of payment of property damages. Id. at 202. The insurance companies proceeded to arbitration under a Nationwide Inter-Company Arbitration Agreement, an agreement to which both insurance carriers were signatories. Id. The arbitrator determined that Cermak, the truck driver, was liable, and Muse, the driver of the car, sued Cermak for damages resulting from her injuries. Id. The Superior Court held that the issue of liability was not collaterally estopped in the litigation between Muse and Cermak because of language of the arbitral clause contained within the Nationwide Inter-Company Agreement. Id. at 204. The agreement provided that any decision or finding arising out of an arbitration which was initiated pursuant to the agreement would not be afforded a preclusive effect in any other claim or suit arising out of the same accident or occurrence. Id. at 203. As a result, the Superior Court held that the general rule, that an arbitration will have a collateral estoppel effect in any subsequent litigation, would not apply as a result of the language of the arbitration agreement which negated the collateral estoppel effect. Id. Muse, however, is fundamentally different from the case sub judice. Muse involved a dispute between two motorists and an arbitration which had been conducted between their insurance carriers. It is well settled that an “insurance company is in privity with its insured.” Catroppa v. Carlton, 2010 Pa. Super. 85, ¶ 8, 998 A.2d 643, 646 (2010). While this principle does have certain limits, the insurance carriers in Muse were generally acting in privity with their insured as a result of the insurance contracts between them. The Superior Court found that 7 “[w]here the terms of an arbitration agreement limit the binding effect of the award in another proceeding, we must honor those terms as part of the agreement between the parties.” Muse, 428 Pa. Super. at 204. It is clear, therefore, that the Superior Court found sufficient privity between an insurance carrier and its insured to extend the terms of a contractual agreement down to Mr. Cermak and Ms. Muse. “Between the parties” had the apparent meaning of the insurers as well as the insured. Id. In the case sub judice, we are confronted with an arbitration agreement which waives the doctrine of collateral estoppel in subsequent litigation between the parties to the agreement, yet the signatories to the arbitration agreement are by no means in privity of contract with the remaining defendants. Thus, Muse does not provide more instruction on the issue sub judice than the general principles discussed above. Both Penske and WSI cite to Frog, Switch & Mfg. Co. v. Pennsylvania Human Relations Commn. for support of their respective arguments. In that case, an employer (Frog, Switch & Mfg. Co.) appealed an order of the Pennsylvania Human Relations Commission finding that it had unlawfully retaliated against an employee. Frog, Switch & Mfg. Co., 885 A.2d at 657. The Superior Court found that the prior findings of an arbitrator in a grievance proceeding under a collective bargaining agreement, that the employer did have just cause for disciplining an employee, as opposed to terminating him, did not have a collateral estoppel effect in proceedings before the Pennsylvania Human Relations Commission on a retaliation complaint. Id. at 662. The court found that “Pennsylvania follows the predominant view among the states that unless the arbitral parties agreed otherwise, a judicially confirmed private arbitration award will have a collateral estoppel effect, even in favor of non-parties to the arbitration, if the arbitrator actually and necessarily decided the issue sought to be foreclosed and the party against whom estoppel is invoked had full incentive and opportunity to litigate the matter.” Id. at 661 (emphasis added) (citing Dyer v. Travelers, 392 Pa. Super. 202, 572 A.2d 762, 764 (1990); Ottaviano v. 8 Southeastern Pennsylvania Transportation Authority, 239 Pa. Super. 363, 370, 361 A.2d 810, 814; Restatement (Second) of Judgments § 84 (1982). This broad language, however, must be understood in accordance with the actual decision of the Superior Court in Frog, Switch & Mfg. Co. The Superior Court did not hold that on the facts of the case before it that the factual and legal findings of the arbitrator would be afforded a preclusive, collateral estoppel effect on subsequent litigation between non-parties to the litigation. Rather, the Superior Court remanded the case for a determination of whether the fourth prong of collateral estoppel, that the party or person privy to the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding, had been satisfied in that case. Frog, Switch & Mfg. Co., 885 A.2d at 668. In the matter sub judice, the only issue which was fully litigated in the arbitration was the liability of Penske to Whirlpool. The other parties in this case did not participate in the arbitration nor were they privy to the arbitration agreement between Whirlpool and Penske. To the extent that there is any difficulty in determining the extent of collateral estoppel in this case, it is resolved by the plain meaning of the arbitration rule to which Whirlpool and Penske subscribe. A decision rendered by the arbitrator is “conclusive only as to the matters being adjudicated in said arbitration, pertaining to the parties present.” The matter which was adjudicated in the arbitration was the question of whether or not Penske had liability for the February 2004 building collapse. Thus, as to this issue, the finding of the arbitrator is conclusive. By its own terms, the arbitration agreement does not apply to other parties or so- called “companion claims or actions.” Therefore, Penske may not deny its own liability. Whether it is precluded from presenting evidence against other defendants or additional defendants in an attempt to establish their joint liability and/or receive an allocation of its degree 9 of fault as compared to other defendants who are found to be liable to Whirlpool is a question for another day. ORDER AND NOW, this day of June, 2011, upon consideration of the Motion for Partial Summary Judgment filed by Additional Defendant Westfield Steel, Inc., and the responses filed thereto, the Motion for Partial Summary judgment is GRANTED. The findings of the arbitrator contained in the Resolute Systems, LLC arbitral award of March 31, 2010 will be treated as established in the above-captioned matter, and given preclusive effect in this action as against Defendant Penske Logistics, LLC (incorrectly designated as Penske Logistics, Inc.). Specifically, Defendant Penske Logistics is collaterally estopped from asserting crossclaims against the additional defendants which deny entirely its liability to Plaintiff Whirlpool as a result of the aforementioned arbitration. BY THE COURT, __________________ Kevin A. Hess, P.J. 10