Smay v. ER Stuebner, Inc.

• Citation: 864 A.2d 1266
• Parties: Rodney G. SMAY, Appellee, v. E.R. STUEBNER, INC. and Skyjack, Inc., and United Rentals, Inc. and United Rentals Aerial Equipment, Inc. and Adams, Eisenhower & Meckley, Inc. d/b/a AEM Architects, Inc. and Berks Rigging & Erecting, Inc. and Multani Associates, Inc. and Rose Hill Construction, Inc. and Eshbach Brothers, L.P. and Conrad Weiser Area School District and Greiner Industries, Inc., Appellees. Appeal of Greiner Industries, Inc., Appellant.
• Decision Date: 30 December 2004
• Court: Superior Court of Pennsylvania

864 A.2d 1266

Rodney G. SMAY, Appellee, v. E.R. STUEBNER, INC. and Skyjack, Inc., and United Rentals, Inc. and United Rentals Aerial Equipment, Inc. and Adams, Eisenhower & Meckley, Inc. d/b/a AEM Architects, Inc. and Berks Rigging & Erecting, Inc. and Multani Associates, Inc. and Rose Hill Construction, Inc. and Eshbach Brothers, L.P. and Conrad Weiser Area School District and Greiner Industries, Inc., Appellees.

Appeal of Greiner Industries, Inc., Appellant.

Superior Court of Pennsylvania.

Argued June 10, 2003.

Filed December 30, 2004.

Robert Dennison and Robert J. Reger, King of Prussia, for appellant.

Gregory S. Hirtzel, Lancaster, for Smay.

Harry D. McMunigal, Wyomissing, for Skyjack.

Edward J. McGinn, Philadelphia for United Rental.

Laura Herzog, Bethlehem, for Rose Hill.

Heidi Villari, Philadelphia, for Conrad Weiser.

Nicholas Noel, Easton, for Adams, Eisenhower & Meckley. Before: MUSMANNO, BOWES and POPOVICH, JJ.

OPINION BY BOWES, J.:

¶ 1 Appellant, Greiner Industries, Inc., appeals from the order denying its petition to compel arbitration. After close review of the parties' briefs and the certified record, we are constrained to reverse the trial court's order and remand for arbitration proceedings.

¶ 2 Rodney Smay, the plaintiff in the underlying action, was injured on a high school construction site in the Conrad Weiser Area School District (the "School District") in the course of his employment and as Appellant's employee. Mr. Smay sustained serious personal injuries when a platform scissor lift that he was using to install wires in the ceiling of the gymnasium fell over and sent him plummeting twenty-five feet to the gymnasium floor. He filed a workers' compensation claim against Appellant and a civil complaint naming Adams, Eisenhower & Meckley, Inc. d/b/a/ AEM Architects, Inc. (the "Architect"), Rose Hill Construction, Inc., E.R. Stuebner, Inc., Skyjack, Inc., United Rentals (North America), Inc. (incorrectly referred to as United Rentals, Inc. and United Rentals Aerial Equipment, Inc.), Berks Rigging & Erecting, Inc., Multani Associates, Inc., Eshbach Brothers, L.P., and the School District as defendants. The School District and the Architect, hereinafter collectively referred to as Appellees, filed joinder complaints against Appellant on November 15, 2001, and January 22, 2001, respectively, wherein they sought indemnification under the construction contract that the School District executed with Appellant.¹ The joinder complaints aver that the alleged injury arose from Appellant's course of performance under the contract with the School District and that pursuant to that contract, Appellant is liable over to Appellees.²

¶ 3 On March 21, 2002, Appellant responded to the joinder complaints by writing to the Architect and the School District to demand arbitration to resolve whether Appellant contractually was obligated to indemnify either party. The Architect replied to Appellant's demand with a letter denying that arbitration was appropriate and suggesting that Appellant seek relief from the trial court. The School District never responded to Appellant's written demand for arbitration. On April 10, 2002, Appellant filed a motion to compel arbitration in this action pursuant to its contract with the School District. The trial court heard oral argument on May 10, 2002, and on June 13, 2002, it denied the motion. On July 1, 2002, this interlocutory appeal followed as of right. See Pa.R.A.P. 311(a)(8); 42 Pa.C.S. § 7320(a)(1) (denial of motion to compel arbitration is appealable as of right).³ While the appeal is pending, the civil action has been partially stayed with respect to matters directed to Appellant. ¶ 4 Berks Rigging & Erecting, Inc., Multani Associates, Inc., Eshbach Brothers, L.P., and E.R. Stuebner, Inc., each filed a notice of no interest pursuant to Pa.R.A.P. 908. Hence, they have no interest in the disposition of this case. Of the remaining appellees, Skyjack, Inc. and United Rentals (North America), Inc. have failed to file briefs.

¶ 5 On April 1, 2003, subsequent to the filing of this appeal and the entry of a partial stay, the trial court granted two uncontested motions for summary judgment filed by the Architect and Rose Hill Construction, Inc. against the plaintiff and all defendants. Thereafter, the Architect filed a notice of no interest in the appeal. No one contests the validity of the April 1, 2003 order in the present appeal. Similarly, on February 4, 2004, the trial court entered summary judgment in favor of the School District against the plaintiff, Mr. Smay. Later, on April 27, 2004, the trial court extended the grant of summary judgment to all cross-claims against the School District. Therefore, as of the date of this writing, Appellees have been dismissed from the underlying action.⁴

¶ 6 The issues before us can be summarized as follows: Whether the trial court erred in denying Appellant's petition to compel arbitration on the basis that the merits of Mr. Smay's underlying personal injury action were beyond the scope of the agreement to arbitrate; whether the Architect, a third-party-beneficiary of the contract, is bound by the arbitration agreement contained in the contract; and whether Appellant waived its right to compel arbitration by availing itself of the common pleas court.

¶ 7 We review a trial court's denial of a motion to compel arbitration for an abuse of discretion and to determine whether the trial court's findings are supported by substantial evidence. Flender Corp. v. Tippins International, Inc., 830 A.2d 1279 (Pa.Super.2003). In doing so, we employ a two-part test to determine whether the trial court should have compelled arbitration. Callan v. Oxford Land Development, Inc., 858 A.2d 1229 (Pa.Super.2004). The first determination is whether a valid agreement to arbitrate exists. D & H Distributing Co. v. National Union Fire Ins. Co., 817 A.2d 1164 (Pa.Super.2003). The second determination is whether the dispute is within the scope of the agreement. Id.

¶ 8 On March 18, 1998, Appellant and the School District executed a contract for the construction of a high school. The contract expressly incorporated the General Conditions of Contract (the "General Conditions") and the more specific Supplementary General Conditions of Contract (the "Supplemental Conditions").⁵ These contract documents contained indemnity and arbitration provisions, which read as follows:

3.18 INDEMNIFICATION

3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner [and] Architect ... from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damages, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefore, but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 3.18.

Supplemental Conditions, at 13-14 (emphases added).

4.5 ARBITRATION

4.5.1 Controversies and Claims Subject to Arbitration. Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof, except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5 [(Waiver of Claims: Final Payment)]. Such controversies or Claims upon which the Architect has given notice and rendered a decision as provided in Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either party. Arbitration may be commenced when 45 days have passed after a Claim has been referred to the Architect as provided in Paragraph 4.3 and no decision has been rendered.

General Conditions, at 12 (emphasis added). The School District does not dispute that a valid agreement to arbitrate exists; instead, it argues that the instant dispute is beyond the scope of the agreement.

¶ 9 However, before we can determine the scope of the agreement to arbitrate, we must first address the Architect's claim that it is not subject to the arbitration agreement. According to the Architect, since it is merely a beneficiary of the indemnification provision, rather than a signatory, it is not a party to the contract between Appellant and the School District. The Architect further asserts that it is expressly exempt from the arbitration agreement pursuant to the supplemental conditions of the contract.

¶ 10 In general, only parties to an arbitration agreement are subject to arbitration. See Cumberland-Perry Area Vocational-Technical School v. Bogar & Bink, 261 Pa.Super. 350, 396 A.2d 433 (1978) (parties cannot be compelled to arbitrate disputes absent agreement to arbitrate). However, a nonparty, such as a third-party beneficiary, may fall within the scope of an arbitration agreement if that is the parties' intent. Cf. Highmark Inc. v. Hospital Service Association of Northeastern Pennsylvania, 785 A.2d 93 (Pa.Super.2001) (third-party beneficiary may enforce arbitration clause even though it is not a signatory to the contract).

¶ 11 The fact that the parties conditioned the Architect's participation in arbitration proceedings under the contract initially would...