Kirleis v. Dickie, McCamey & Chilcote, P.C.

• Citation: 560 F.3d 156
• Decision Date: 24 March 2009
• Docket Number: No. 07-3504.,07-3504.
• Parties: Alyson J. KIRLEIS, Appellee, v. DICKIE, McCAMEY & CHILCOTE, P.C., Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

560 F.3d 156

Alyson J. KIRLEIS, Appellee, v. DICKIE, McCAMEY & CHILCOTE, P.C., Appellant.

No. 07-3504.

United States Court of Appeals, Third Circuit.

Argued May 22, 2008.

Filed March 24, 2009.

Edward B. Friedman, (Argued), Gloria A. Aiello Friedman & Friedman, Pittsburgh, PA, Attorneys for Appellee.

Martin J. Saunders, (Argued), Sunshine R. Fellows, Donna J. Geary, Jackson Lewis, Pittsburgh, PA, Attorneys for Appellant.

Before: SMITH, HARDIMAN and NYGAARD, Circuit Judges.

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

In this appeal we consider a question of first impression under Pennsylvania law: whether a shareholder/director may be compelled to arbitrate her civil rights claims pursuant to corporate bylaws to which she has not explicitly assented. When first presented with this issue, we petitioned the Pennsylvania Supreme Court to certify the question because we found that it exposed tension between corporate law principles and arbitration contract principles. The Pennsylvania Supreme Court denied the petition, so we shall answer the question.

I.

Alyson J. Kirleis practices law with the Pittsburgh firm of Dickie, McCamey & Chilcote, P.C. (Firm). She worked at the Firm as a summer associate in 1987 and became a full-time associate the following year. In 1998, Kirleis became a Class B shareholder and was promoted to Class A shareholder/director in 2001. Since she became a shareholder/director, Kirleis's relationship with the Firm has been governed by the Firm's corporate bylaws.

Kirleis filed two complaints against the Firm in the United States District Court for the Western District of Pennsylvania alleging sex discrimination, retaliation, and hostile work environment in violation of federal and state law.¹ The Firm filed a motion to compel arbitration pursuant to 9 U.S.C. § 4, citing a mandatory arbitration provision in its bylaws. The District Court denied the motion and the Firm filed this timely appeal.²

II.

The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction pursuant to 9 U.S.C. § 16(a)(1)(B). Our review of the District Court's order denying the motion to compel arbitration is plenary. First Liberty Inv. Group v. Nicholsberg, 145 F.3d 647, 649 (3d Cir.1998). We apply the same standard as the District Court, compelling arbitration only where there is "no genuine issue of fact concerning the formation of the agreement" to arbitrate. See Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir.1980).³ In making this determination, the party opposing arbitration is entitled to "the benefit of all reasonable doubts and inferences that may arise." Id.

III.

The Firm's motion to compel arbitration was based on the following provision of its bylaws:

Section 9.01. ARBITRATION,

(a) General Rule: Any dispute arising under these By-Laws including disputes related to the right to indemnification, contribution or advancement of expenses as provided under these By-Laws, shall be decided only by arbitration in Pittsburgh, Pennsylvania, in accordance with the commercial arbitration rules of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the shareholder, director, officer, or indemnified representative and the third of whom shall be selected by the other two arbitrators.

As relevant to this appeal, Kirleis averred in her affidavit:

15. I was never provided with a copy of the By-Laws of defendant Firm at the time that I was made a Class B shareholder or at anytime thereafter. In fact, I only saw the documents which Mr. Wiley purports to be Firm's By-Laws for the first time when I received Mr. Wiley's Affidavit in connection with this case, approximately 9 years after being made a Class B shareholder-employee and 19 years after commencing the practice of law with the firm.

16. I was never informed of the presence of the arbitration provision in the By-Laws which Firm is now seeking to enforce against me.

17. I never signed any agreement or document which refers to or incorporates the arbitration provision in the By-Laws.

18. I never agreed to arbitrate my claims against Firm.

At this stage of the litigation, the Firm has not challenged the veracity of Kirleis's averments. Instead, the Firm argues that her status as a shareholder/director charged Kirleis with constructive knowledge of the terms of the bylaws and manifested her acceptance of the arbitration provision. In support of this argument, the Firm notes that Kirleis accepted compensation and perquisites pursuant to the bylaws. For example, Section 3.08(g) of the bylaws provided Kirleis with, inter alia, a car allowance of $600 per month, a parking lease at the Firm's PPG Place office complex, an annual trip to a legal seminar or convention with airfare included,⁴ reimbursement of 70% of her annual dues at St. Clair Country Club, and a life insurance policy with a death benefit of $800,000. In addition, Kirleis accepted: (1) compensation pursuant to Section 4.03(h) of the bylaws; (2) a position on the Board of Directors pursuant to Section 2.02; and (3) a right to vote on all Firm matters reserved to the Board, pursuant to Section 1.03(b). Finally, Kirleis held various management positions, including: chairperson of the Associate Review Committee, member of an ad hoc committee charged with administering an Executive Committee election, and member of the Shareholder Review Committee.

In sum, the Firm argues, as it did before the District Court, that Kirleis "cannot have it both ways" by selectively accepting the benefits of the bylaws under Sections 1, 2, 3, and 4 while refusing to be bound by the arbitration clause of Section 9.

IV.

To determine whether the parties agreed to arbitrate, we turn to "ordinary state-law principles that govern the formation of contracts." First Options of Chic, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). See also Blair v. Scott Specialty Gases, 283 F.3d 595, 603 (3d Cir.2002). Kirleis and the Firm agree that Pennsylvania law applies here. Because arbitration is a matter of contract, John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 547, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964), before compelling arbitration pursuant to the Federal Arbitration Act, a court must determine that (1) a valid agreement to arbitrate exists, and (2) the particular dispute falls within the scope of that agreement. Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir.2005); Quiles v. Fin. Exch. Co., 879 A.2d 281, 283 n. 3 (Pa.Super.2005).

It is well established that the Federal Arbitration Act (FAA), reflects a "strong federal policy in favor of the resolution of disputes through arbitration." Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 263 (3d Cir.2003). But this presumption in favor of arbitration "does not apply to the determination of whether there is a valid agreement to arbitrate between the parties." Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir.2002).

Under Pennsylvania law, contract formation requires: (1) a mutual manifestation of an intention to be bound, (2) terms sufficiently definite to be enforced, and (3) consideration. Blair, 283 F.3d at 603. In the employment context, arbitration agreements will be upheld when they are "specific enough (i.e. unambiguous) to cover the employee's claims" and "the employee has expressly agreed to abide by the terms of [the] agreement." Quiles, 879 A.2d at 285 (emphasis added). The Pennsylvania Supreme Court has held that an agreement to arbitrate must be "clear and unmistakable" and cannot arise "by implication." Emmaus Mun. Auth. v. Eltz, 416 Pa. 123, 204 A.2d 926, 927 (1964). Likewise, we have held that "[b]efore a party to a lawsuit can be ordered to arbitrate ... there should be an express, unequivocal agreement to that effect." Par-Knit Mills, 636 F.2d at 54 (emphasis added).

In support of her argument that no arbitration contract was formed, Kirleis relied heavily on the Pennsylvania Superior Court's decision in Quiles, which held:

Because [the employee] was never given the handbook that included the information explaining the company's policy to exclusively arbitrate any workplace disputes, she was unable to accept the terms of the agreement to arbitrate. Without her acceptance, there was no agreement formed between the parties and, thus, no grounds to compel arbitration.

879 A.2d at 283. The District Court agreed and held that the Firm's argument that Kirleis "`must have known' or `should have asked' falls short of the standard required by Pennsylvania law that plaintiff actually agree to arbitrate her claims." Kirleis v. Dickie, McCamey & Chicolte, PC, 2007 WL 2142397, at *7 (W.D.Pa. July 24, 2007). Because the bylaws were not distributed to Kirleis, she could not have agreed to arbitrate her claims. Id.

The Firm claims that the District Court erred by: (1) finding Kirleis's "self-serving and conclusory affidavit" sufficient to establish a genuine issue of fact as to the existence of an agreement to arbitrate; (2) ignoring the "well-settled" corporate law principle that members of the corporation are "presumed to know and understand" the bylaws; (3) relying on Quiles; and (4) allowing Kirleis to accept benefits of the bylaws without honoring her responsibilities thereunder. We consider these arguments seriatim.

A.

The Firm first argues that Kirleis's "self-serving and conclusory" affidavit cannot create a genuine issue of material fact regarding the existence of an arbitration agreement.

It is true that "conclusory, self-serving affidavits are insufficient to withstand a motion for summary judgment." Blair, 283 F.3d at 608. Instead, the affiant must set forth specific facts that reveal a genuine issue of material fact.. Id. (collecting cases); Maldonado v. Ramirez, 757 F.2d 48, 51 (3d Cir.1985); see also FED. R.CIV.P. 56(e)(2) ("When a motion for...