Kirleis v. Dickie McCamey ( 2009 )

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
3-24-2009
Kirleis v. Dickie McCamey
Precedential or Non-Precedential: Precedential
Docket No. 07-3504
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-3504
ALYSON J. KIRLEIS,
Appellee,
v.
DICKIE, MCCAMEY & CHILCOTE, P.C.,
Appellant.
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Nos. 06-cv-01495 & 06-cv-01666)
District Judge: Honorable Gary L. Lancaster
Argued May 22, 2008
Before: SMITH, HARDIMAN and NYGAARD, Circuit
Judges.
Filed: March 24, 2009
Edward B. Friedman (Argued)
Gloria A. Aiello
Friedman & Friedman
900 Fifth Avenue
Pittsburgh, PA 15219-0000
Attorneys for Appellee
Martin J. Saunders (Argued)
Sunshine R. Fellows
Donna J. Geary
Jackson Lewis
One PPG Place
28th Floor
Pittsburgh, PA 15222-0000
Attorneys for Appellant
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
2
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
1
Kirleis’s claims arose under the Civil Rights Act of
1964, 42 U.S.C. § 2000e et seq., the Fair Labor Standards Act
of 1938, 29 U.S.C. § 201 et seq., and the Pennsylvania Human
Relations Act, 43 Pa. Stat. Ann. § 951 et seq.
2
The Firm also filed a motion to dismiss for lack of
jurisdiction pursuant to Rule 12(b) of the Federal Rules of Civil
Procedure. Therein, the Firm challenged Kirleis’s averment that
3
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
she is an employee of the Firm. The District Court denied the
motion without prejudice to the Firm’s ability to raise it
following discovery and this decision is not at issue on appeal.
3
The standard for determining whether a genuine issue of
material fact exists regarding the existence of an agreement to
arbitrate is “quickly recognized as the standard used by district
courts in resolving summary judgment motions pursuant to Fed.
R. Civ. P. 56(c).” Par-Knit Mills, 636 F.2d at 54 n.9.
4
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.
5
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:
4
Kirleis traveled to Rome, Italy in 2006 for a continuing
legal education seminar sponsored by Duquesne University Law
School. The Firm paid for her conference registration and
airfare and provided her with $2,000 in spending money.
6
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 (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 (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
7
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, 204 A.2d 926, 927
(Pa. 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
8
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 & Chilcote, 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.
9
(collecting cases); Maldonado v. Rameriz, 757 F.2d 48, 51 (3d
Cir. 1985); see also F ED. R. C IV. P. 56(e)(2) (“When a motion
for summary judgment is properly made and supported, an
opposing party may not rely merely on allegations or denials in
its own pleading; rather, its response must . . . set out specific
facts showing a genuine issue for trial.”).
Contrary to the Firm’s assertion, Kirleis’s affidavit
satisfies this standard. Far from a conclusory statement that she
never agreed to arbitrate, Kirleis details the specific
circumstances that rendered the formation of an agreement to
arbitrate impossible. For example, she swore under oath that
she “was never provided with a copy of the By-Laws of
defendant Firm,” “never signed any agreement or document
which refers to or incorporates the arbitration provision in the
By-Laws,” and “never agreed to arbitrate . . . claims against
Firm.” Not only are these allegations sufficiently specific, they
are uncontested by the Firm. Had the Firm submitted
contradictory evidence showing that Kirleis had received the
bylaws or had signed them, its argument regarding the
sufficiency of Kirleis’s affidavit would merit further discussion.
Even then, the task of weighing the evidence and choosing
which side to believe would have been for a jury. Par-Knit
Mills, 636 F.2d at 54.
The cases cited by the Firm do not suggest a different
conclusion. The Firm cites a Southern District of Indiana case
for the proposition that an employee’s own “self-serving
affidavit” attesting to the fact that she “was not given the
opportunity to read [an arbitration] agreement” before signing
it was not “sufficient evidence to show a triable issue as to the
10
validity and enforceability of [that] agreement.” Firm Br. 14-15
(citing Ortiz v. Winona Mem. Hosp., 2003 WL 21696524 at *9
(S.D. Ind. June 4, 2003)). Even were we to accept this
proposition, it does not control this appeal.
Here, the averments in Kirleis’s affidavit go well beyond
those alleged by the employee in Ortiz. For example, Kirleis
alleges that she was neither aware of nor received the arbitration
provision contained in the Firm’s bylaws. A fortiori, she was
never given the opportunity to read or consent to it. Moreover,
Kirleis was never asked to sign any document that included an
arbitration agreement. Cf. Ortiz, 2003 WL 21696542, at *2
(without reading them, employee signed two employee
acknowledgment forms that, unbeknownst to her, contained
arbitration agreements). Unlike Ortiz’s allegations, which
reflected her own failure to read her employment contract
before signing it, Kirleis’s allegations reflect the Firm’s failure
to obtain her consent to be bound. See Blair, 283 F.3d at 603.
Accordingly, Kirleis’s allegations create a genuine issue of fact
as to the existence of an agreement to arbitrate.
The Firm also relies on a case in which an employer
distributed to its employees in paycheck envelopes a brochure
entitled “Pinkerton’s Arbitration Program.” Tinder v. Pinkerton
Sec., 305 F.3d 728, 731, 736 (7th Cir. 2002). In Tinder, the
Court of Appeals for the Seventh Circuit held that an
employee’s affidavit stating that she “[did] not recall seeing or
reviewing the Arbitration Program brochure” was insufficient to
create a triable issue as to whether “the brochure was distributed
to her” in light of the employer’s assertion to the contrary. Id.
at 735-36.
11
This appeal differs significantly from Tinder. First,
Kirleis averred that she “was never provided with a copy of the
By-Laws of defendant Firm,” not that she merely could not
“recall seeing or reviewing” them. Second, the material issue
here is whether Kirleis agreed to be bound by the Firm’s
arbitration provision, not whether a document containing that
provision was ever distributed to her. Even had she received
such a document — which the uncontroverted evidence
indicates she did not — a mere offer is insufficient to create a
triable issue as to the existence of a contract to arbitrate. See
Blair, 283 F.3d at 603. For these reasons, Tinder is inapposite.
Kirleis submitted specific, undisputed evidence that she
never agreed to arbitrate her claims against the Firm. The
District Court did not err in finding that this evidence creates a
genuine issue of material fact.
B.
The Firm next argues that Kirleis’s status as a
shareholder/director of the Firm put her on constructive notice
of the arbitration provision in the bylaws and implied her intent
to be bound thereby. This argument has persuasive force as it
highlights the tension between corporate law principles —
which generally impute to members of the corporation
knowledge and acceptance of corporate bylaws — and the law
of contracts, which requires consent to be bound. Compare
Morris v. Metallien Land Co., 30 A. 240, 241 (Pa. 1894)
(member of corporation “is subject to its constitution, and bound
by its by-laws . . . which he is presumed to know and
understand”) with Eltz, 204 A.2d at 927 (agreement to arbitrate
12
must be “clear and unmistakable” and cannot arise “by
implication”).
Seizing on this tension, the Firm cites two cases for the
proposition that a court may compel arbitration because of
“arbitration provisions contained within corporate bylaws.”
Firm Br. 15 (citing Bercovitch v. Baldwin Sch., Inc., 133 F.3d
141 (1st Cir. 1998) and Rushing v. Gold Kist, Inc., 567 S.E.2d
384 (Ga. Ct. App. 2002)).
In Bercovitch, plaintiffs sued a private school for
discrimination pursuant to the Americans with Disabilities Act.
The school moved to compel arbitration because plaintiffs
signed an agreement that manifested their intention to “abide by
the By-Laws of the School . . . [c]opies [of which] [were]
available for review at the school main office.” Bercovitch, 133
F.3d at 147. The school bylaws, in turn, provided for “final and
binding arbitration of any dispute regarding the school’s rules,
regulations, or policies.” Id. Based on these facts, the court
compelled plaintiffs to arbitrate. Id.Bercovitch is distinguishable for two reasons. First,
unlike the plaintiffs in that case, Kirleis never signed any
arbitration agreement or other document that incorporated the
arbitration provision in the bylaws. Even more fundamentally,
the Bercovitch plaintiffs never challenged the existence of an
agreement to arbitrate between themselves and the school.
Bercovitch, 133 F.3d at 147. Rather, they argued that their ADA
claim did not fall within the scope of that agreement. Id. Here,
by contrast, Kirleis asserts that she never agreed to arbitrate any
claims against the Firm.
13
The Firm’s reliance on Rushing is likewise misplaced.
Apart from the fact that it is an out-of-jurisdiction intermediate
state court decision, the party seeking to avoid arbitration in that
case signed an agreement in which he “expressly consented to
be bound by the [cooperative’s] By-Laws” and any By-Laws
“hereafter in effect.” Rushing, 567 S.E.2d at 388. In light of
this written promise, the court held that the party was bound by
an amendment to the bylaws that mandated arbitration of
disputes. Id. Here, Kirleis never signed an agreement that
subjected her to arbitration.
In sum, under Pennsylvania law, explicit agreement is
essential to the formation of an enforceable arbitration contract.
Eltz, 204 A.2d at 927. See also Quiles, 879 A.2d at 285;
Philmar Mid-Atl., Inc., v. York St. Assoc. II, 566 A.2d 1253,
1255 (Pa. Super. 1989) (“A mutual manifestation of intent to be
bound is an essential element of a contract.”). Thus, the Firm’s
argument that Kirleis impliedly agreed to arbitrate her claims
must fail under Pennsylvania law.
C.
The Firm next argues that the District Court erred in
relying on Quiles v. Financial Exchange Co., 879 A.2d 281 (Pa.
Super. Ct. 2005). We review Quiles in some detail because, like
the District Court, we find it apposite here.
In Quiles, Dollar Financial Group petitioned to compel
its former employee, Luz Quiles, to arbitrate her defamation
claim as required by the company’s employee handbook. Id. at
283. Quiles claimed that she never received the handbook,
although she admitted to signing an employee acknowledgment
14
form that required her to affirm that she “carefully read the
Handbook” and the “DISPUTE RESOLUTION PROGRAM
and provisions relating to arbitration” contained therein. Id. at
283-84. The handbook further provided that by accepting
employment, all employees agreed to be bound by the dispute
resolution program. Id. at 284. The Court of Common Pleas
denied Dollar’s petition to compel arbitration, concluding that
“because Quiles never received the Handbook, she could not
have been fully informed of the arbitration policy and
provisions.” Id. at 284.
On appeal, the Pennsylvania Superior Court framed the
question as “whether an employee is bound to arbitration
provisions found in an employee handbook (when that employee
was never given a copy of the handbook containing the actual
arbitration provisions and had signed an acknowledgment form
stating she read such handbook under suspect circumstances).”
Id. at 285. Beginning with the general rule that arbitration
agreements are presumptively enforceable if they are “specific
enough” and “the employee has expressly agreed to abide by
[their] terms,” the court turned to the specifics of the case. Id.
at 285 (emphasis added) (citing Cohn v. Penn Beverage Co., 169
A. 768, 768-69 (Pa. 1934) and Parsons Bros. Slate Co. v.
Commonwealth, 211 A.2d 423, 424 (Pa. 1965)).
The court declined to apply case law suggesting that “a
party’s failure to read a contract will not justify nullification or
avoidance,” because “without a copy of the Handbook, Quiles
was not even given the opportunity to read the terms of the
arbitration agreement; there was no arbitration clause in the
[employee acknowledgment form] signed by Quiles.” Id. at
15
286. Indeed, the court viewed the fact that Quiles never
received the handbook as dispositive: “Quiles could not validly
agree to arbitrate her claims without first having been given a
copy of the Handbook, the only document that detailed and
explained . . . the company’s proposed arbitration process.” Id.
at 288. To bolster this conclusion, the court added that “Quiles
was unfamiliar with the English language and had not even
received a high school diploma,” and that she was pressured by
her supervisor to sign the employee acknowledgment form. Id.The Firm attempts to distinguish Quiles on two principal
grounds: (1) the arbitration provision in Quiles was set forth in
an employee handbook while the provision here was in the
corporate bylaws, which Kirleis is “presumed to know and
understand,” and (2) the employee in Quiles “was from Puerto
Rico, had difficulty with the English language, had never
completed high school and was unfamiliar with the term
‘arbitration.’” Firm Br. 17.
The Firm claims that employee handbooks are different
from corporate bylaws because members of a corporation are
presumed to understand bylaws in a way that employees are not
presumed to understand handbooks. We find this argument
persuasive to a point. A shareholder/director of a professional
corporation who has had the benefit of advanced education and
training and who has been involved in law firm management
typically would be more knowledgeable regarding corporate
bylaws than an entry-level worker would be likely to know
about an employee handbook. But this factual distinction, as
cogent as it may be, is immaterial to the fact that Pennsylvania
law requires arbitration agreements to be explicit. To the extent
16
the Firm argues that this rule of law does not apply to a
corporate shareholder/director, we have rejected that argument
in Part IV.B., supra.
We also note that Quiles signed an employee
acknowledgment form that expressly bound her to arbitrate
under her company’s terms. By accepting employment with
Dollar, Quiles “agree[d] to be bound by the terms of the [dispute
resolution procedures].” Quiles, 879 A.2d at 284. Despite this
explicit agreement to submit to the terms of a handbook that
included arbitration, the Superior Court found no agreement to
arbitrate. Here, by contrast, there was no explicit agreement;
rather, the Firm seeks to derive one from corporate law
principles, making its implied acceptance argument even more
tenuous than the one rejected in Quiles.
The Firm’s second distinction is even less persuasive
because the Superior Court’s observations about Quiles’s
background were classic dicta. After concluding that “Quiles
could not validly agree to arbitrate her claims without first
having been given a copy of the Handbook,” the court wrote:
“[i]n addition . . . the facts that Quiles was unfamiliar with the
English language and had not even received a high school
diploma, further invalidated any such agreement to arbitrate.”
Id. at 288 (emphasis added). These observations cannot fairly
be read as essential to the court’s holding in Quiles.
Contrary to the Firm’s arguments, Quiles is analogous to
the present case in at least one critical respect: like Quiles,
Kirleis never received a copy of the only document containing
17
the firm’s arbitration provision. Without this document, Kirleis
could not have explicitly agreed to arbitrate her claims.
D.
Finally, the Firm argues that Kirleis should be estopped
from arguing that she is not bound to arbitrate pursuant to the
bylaws because she has availed herself of other benefits
provided thereunder.
Equitable estoppel precludes a party from doing an act
differently than the manner in which he induced another party
to expect. Zitelli v. Dermatology Educ. & Research Found., 633
A.2d 134, 139 (Pa. 1993). It arises when a party “intentionally
or through culpable negligence induces another to believe
certain facts to exist” and the other party “rightfully relies and
acts on such belief” to its detriment. Id. The essential elements
of equitable estoppel are thus inducement and detrimental
reliance. See id.The Firm cites numerous cases that stand for the
unremarkable proposition that a party to a contract cannot
enforce favorable terms while disavowing others. Firm Br. 19-
21. These cases miss the mark. As we have explained, Kirleis
could not have explicitly agreed to arbitrate her claims because
she never received a copy of the bylaws and was unaware of the
existence of the arbitration provision contained therein. To the
extent the Firm argues that Kirleis impliedly agreed to arbitrate,
this is a legal impossibility under Quiles for the reasons we
explained in Section IV.C., supra. Accordingly, the District
Court did not err in rejecting the Firm’s equitable estoppel
argument.
18
V.
We conclude by citing the Pennsylvania Supreme Court’s
Order denying our petition to certify the question presented in
this case. Therein, the Court chose not to decide the issue, but
indicated clearly enough that we have chosen the proper course
in resolving the tension between Pennsylvania corporate law and
arbitration contract law. The Pennsylvania Supreme Court
reasoned:
With regard to the corporate law principle, the
Third Circuit quotes a statement in Morris that a
member of a corporation “is subject to its
constitution, and bound by its by-laws . . . which
he is presumed to know and understand[.]” On its
face, that statement could be seen as being in
conflict with the arbitration law precept that an
agreement to arbitrate cannot rise by implication.
A close review of Morris, however, reveals that
the brief passage quoted by the Third Circuit is
obiter dicta. Morris did not address the issue of
whether a shareholder is bound by bylaws even
when that shareholder has no actual knowledge of
the bylaws. Rather, the specific relevant question
that concerned the Morris Court was whether the
company had provided the notice required by the
bylaws prior to taking action to the shareholders’
detriment. The phrase stating that a shareholder
is presumed to know and understand the bylaws is
part of a lengthy quote of an 1877 New Jersey
Court of Errors and Appeals decision. . . . The
‘presumed to know and understand’ phrase which
19
concerns the Third Circuit, on the other hand, had
no bearing on the resolution in Morris . . . .
Morris has been quoted only three times and not
for the proposition that shareholders are presumed
to know the contents of the bylaws.
Kirleis v. Dickie, McCamey & Chilcote, P.C., No. 50 WM 2008
(Pa. Oct. 22, 2008) (internal citations omitted; emphasis in
original).
For all the foregoing reasons, we will affirm the
judgment of the District Court.
20