Langston v. National Media Corp.

• Decision Date: 20 November 1992
• Citation: 617 A.2d 354,420 Pa.Super. 611
• Parties: , 8 IER Cases 41 Nancy Marcum LANGSTON, Appellee, v. NATIONAL MEDIA CORPORATION and Media Arts International, Ltd., Appellants.
• Court: Pennsylvania Superior Court

Page 354

617 A.2d 354

420 Pa.Super. 611, 8 IER Cases 41

Nancy Marcum LANGSTON, Appellee, v. NATIONAL MEDIA CORPORATION and Media Arts International Ltd., Appellants.

Superior Court of Pennsylvania.

Argued Jan. 30, 1992.

Filed Nov. 20, 1992.

Mark L. Alderman, Philadelphia, for appellants.

Sheldon L. Albert, Philadelphia, for appellee.

Before CIRILLO, DEL SOLE and KELLY, JJ.

KELLY, Judge:

In this opinion we are called upon to determine, inter alia, whether the Uniform Arbitration Act, 42 Pa.C.S.A. § 7301 et seq. (the Arbitration Act) precludes a trial court from granting equitable relief in the nature of a preliminary injunction prior to a determination of whether the underlying dispute is, in fact, arbitrable. We conclude that the Act does not abrogate the trial court's power to issue injunctive relief and affirm the order of the trial court awarding same against Media Arts International.

The relevant facts and procedural history are as follows. Appellee, Nancy Langston, was employed as president of appellant, Media Arts International (MAI). Appellant, National Media Corporation (NMC) is the corporate parent of MAI. Appellee's employment with appellant, MAI, was pursuant to a written employment agreement which, in relevant part, provided:

(d) In the event that the Executive disputes a determination that Cause exists for terminating her employment hereunder pursuant to paragraph 10(b), or Company disputes a determination that Good Reason exists for Executive's resignation of her Employment pursuant to paragraph 10(c)(2)(i), either party disputing such determination shall serve the other with written notice of such dispute ("Dispute Notice") within thirty (30) days after receipt of the Dismissal Notice or Notice of Resignation for Good Reason. Within fifteen (15) days thereafter, the Executive or the Company, as the case may be, shall, in accordance with the Rules of the American Arbitration Association (AAA), file a petition with the AAA for arbitration of the dispute, the costs thereof to be shared equally by the Executive and the Company unless an order of the AAA provides otherwise. In the event the Executive serves a Dispute Notice upon the Company, an amount equal to the portion of the Base Salary Executive would be entitled to receive pursuant to 10(c)(1)(i) shall be placed by the Company in an interest-bearing escrow account mutually agreeable to the parties or the Company shall deliver for the benefit of the Executive an irrevocable letter of credit containing terms, including those relating to the accrual of interest, mutually agreeable to the parties.

Employment Agreement, 12/17/90 at 18-19 (emphasis added).

In early September, 1991, a dispute arose as to whether appellee had voluntarily resigned her position as president of MAI or whether she had been terminated. Appellee, believing she had been wrongfully terminated, commenced an arbitration proceeding by filing a demand for arbitration with the American Arbitration Association. When appellant, MAI, failed to place any money in escrow or pay its share of the administrative costs of arbitration, appellee sought a preliminary injunction directing both MAI and NMC, as parent corporation, to deposit in escrow that portion of her salary she would be entitled to pursuant to the Employment Agreement and pay their share of the arbitration administrative fees. Appellants answered the petition for a preliminary injunction raising the lack of an arbitrable issue as well as the absence of authority for the trial court to issue such an injunction in a matter subject to arbitration. A hearing was held thereafter, and the trial court subsequently issued an order granting appellee's petition for a preliminary injunction and directing appellants to deposit $872,812.00 in escrow along with paying one-half of the arbitration fee. This timely appeal followed.

On appeal appellants raise the following issues for our consideration:

1. WHETHER THE TRIAL COURT CORRECTLY GRANTED ANCILLARY INJUNCTIVE RELIEF IN AN ACTION BROUGHT UNDER THE PROVISIONS OF THE UNIFORM ARBITRATION ACT, WHICH IS A MANDATORY, EXCLUSIVE AND ADEQUATE STATUTORY REMEDY?

2. WHETHER THE TRIAL COURT CORRECTLY GRANTED RELIEF ANCILLARY TO THE UNDERLYING ARBITRATION WITHOUT COMPELLING ARBITRATION?

3. WHETHER THE TRIAL COURT ERRED BY CONCLUDING THAT APPELLEE HAD DEMONSTRATED A RIGHT TO ISSUANCE OF A PRELIMINARY INJUNCTION?

4. WHETHER THE TRIAL COURT PROPERLY ENTERED A MANDATORY PRELIMINARY INJUNCTION AGAINST APPELLANT NATIONAL MEDIA CORPORATION

("NMC"), WHO WAS NOT A PARTY TO ANY ARBITRATION AGREEMENT BUT MERELY WAS GUARANTOR OF THE FINANCIAL OBLIGATIONS OF APPELLANT MEDIA ARTS INTERNATIONAL, LTD. ("MAI") UNDER THE CONTRACT AT ISSUE?

5. WHETHER THIS COURT SHOULD CONTINUE THE STAY OF THE INJUNCTION PENDING FINAL DISPOSITION OF THIS APPEAL?

Appellants' Brief at 2.

Initially, appellants contend that the trial court erred in granting appellee injunctive relief because such relief is outside the scope of the trial court's authority pursuant to the Uniform Arbitration Act. 42 Pa.C.S.A. § 7301 et seq. According to appellants, appellee's sole avenue of relief was a petition to compel arbitration pursuant to the Employment Agreement. Accordingly, under the Arbitration Act, the court's only authority was to either compel or refuse to compel arbitration, depending on the court's decision as to the arbitrability of the underlying issue. Any other action by the trial court, such as the ancillary relief granted herein, is precluded by the Arbitration Act and is, therefore, improper.

Whether a trial court has subject matter jurisdiction to grant injunctive relief in a dispute subject to arbitration presents an issue of first impression in this Commonwealth. The trial court found guidance in the reasoning of the federal courts which have addressed this exact question under the Federal Arbitration Act. 9 U.S.C. §§ 1-16. In so doing, the court concluded that it did possess the power to grant injunctive relief pending the outcome of the arbitration proceedings. For the following reasons, we agree with the trial court that it possessed subject matter jurisdiction to issue the injunctive relief herein.

Recently, in Dickler v. Shearson Lehman Hutton, Inc., 408 Pa.Super. 286, 596 A.2d 860 (1991), this Court was asked whether a claim for equitable relief was outside the parties' arbitration agreement and whether arbitrators are empowered to dispense equitable relief under the Arbitration Act. In concluding that arbitrators are empowered to dispense equitable relief, this Court recognized that Pennsylvania, as a matter of public policy, had fallen in line with the federal authorities in its recognition and acceptance of arbitration as a necessary tool for relieving crowded dockets and ensuring the swift and orderly settlement of disputes. Id. at 293, 596 A.2d at 863-64; see also Waddell v. Shriber, 465 Pa. 20, 348 A.2d 96 (1975); Elkins & Co. v. Suplee, 371 Pa.Super. 570, 538 A.2d 883 (1988).

Looking to federal authorities for guidance on the instant question, we find that it is precisely this underlying recognition of the purpose for and necessity of arbitration which has influenced the federal circuit courts in finding authority in the federal district courts to issue injunctive relief prior to the determination of the arbitrability of the underlying dispute. Without such authority, the federal courts have concluded, the utility of arbitration as a vehicle for dispute resolution would be ultimately rendered asunder, as the underlying controversy is rendered moot.

For example, in Teradyne v. Mostek Corp., 797 F.2d 43 (1st Cir.1986), the Court held that a district court had not erred in granting the plaintiff injunctive relief to insure that the defendant did not dispose of its assets which could satisfy a potential award. Id. at 47-51. This was so even though the underlying dispute had yet been declared arbitrable. The Court summarized the rationale for such a rule as follows:

[T]his approach reinforces rather than detracts from the policy of the Arbitration Act.... We believe that the congressional desire to enforce arbitration agreements would frequently be frustrated if the courts were precluded from issuing preliminary injunctive relief to preserve the status quo pending arbitration and, ipso facto, the meaningfulness of the arbitration process.

Id. at 51. Indeed, the Court concluded that arbitration would become a "hollow formality" if parties were able to irretrievably alter the status quo pending the outcome of the underlying dispute. Id.

In Ortho Pharmaceutical Corp. v. Amgen, Inc., 882 F.2d 806 (1989), the Third Circuit fell into line with the overwhelming majority of the federal circuits in concluding that a district court possessed the authority to grant injunctive relief in an arbitrable dispute. Therein the Court reasoned that because arbitration agreements generally reflected the parties' intention to abide by an orderly process of dispute resolution, it would be error to "construe such an agreement as constituting a 'waiver' by either party of the right to seek preliminary injunctive relief necessary to prevent one party from eviscerating the significance of the agreed-upon procedures." Id. at 812. See also Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1051-1054 (2d Cir.1990); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756 F.2d 1048, 1052-1054 (4th Cir.1985); Sauer-Getriebe KG v. White Hyraulics, Inc., 715 F.2d 348 (7th Cir.1983), cert. denied, 464 U.S. 1070, 104 S.Ct. 976, 79 L.Ed.2d 214; PMS Distributing Co., Inc. v. Huber & Suhner, A.G., 854 F.2d 355, 358 (9th Cir.1988) (citing Teradyne, supra, for holding that Federal Arbitration Act does not preclude district court from granting a writ of possession pending the outcome of arbitration); Ferry-Morse Seed Co. v. Food Corn, Inc., 729 F.2d 589 (8th Cir.1984) (affirming the grant of...