Commonwealth Ex Rel. Kane v. Philip Morris, Inc. , 2015 Pa. Commw. LEXIS 508 ( 2015 )


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  •           IN THE COMMONWEALTH COURT OF PENNSYLVANIA
    Commonwealth of Pennsylvania           :
    By Kathleen G. Kane, Attorney General, :
    Appellant    :
    :
    v.                        :           No. 2422 C.D. 2014
    :           Argued: October 6, 2015
    Philip Morris, Inc.; RJ Reynolds       :
    Tobacco Company; Brown &               :
    Williamson Tobacco Corporation;        :
    B.A.T. Industries, PLC; The American :
    Tobacco Company, Inc.; C/O Brown & :
    Williamson Tobacco Corporation;        :
    Lorillard Tobacco Company; Liggett     :
    Group, Inc.; United States Tobacco     :
    Company; The Tobacco Institute, Inc.; :
    The Council For Tobacco Research       :
    U.S.A., Inc.; Smokeless Tobacco        :
    Council, Inc., and Hill & Knowlton,    :
    Inc.                                   :
    BEFORE:        HONORABLE DAN PELLEGRINI, President Judge
    HONORABLE ROBERT SIMPSON, Judge
    HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge
    OPINION
    BY JUDGE SIMPSON                              FILED: November 18, 2015
    In this tobacco litigation appeal, the Commonwealth asks whether the
    Court of Common Pleas of Philadelphia County1 (trial court) erred by denying its
    motion to compel single-state arbitration to determine whether it diligently
    enforced its qualifying statute in 2004 and by granting the motion to compel
    1
    The Honorable Patricia A. McInerney presided.
    multistate arbitration filed by the participating tobacco manufacturers (PMs)2 to the
    1998 Master Settlement Agreement (MSA). The Commonwealth contends the
    MSA does not provide for multistate arbitration to decide its diligence because
    Pennsylvania is not on the same side as other states, and such a reading undermines
    the Commonwealth’s sovereign rights. PMs assert the Commonwealth’s appeal of
    the trial court’s interlocutory orders should be quashed for lack of jurisdiction.
    Upon determining we have jurisdiction over the Commonwealth’s appeal, we
    affirm.
    I. Background
    In 1998, 52 states and territories (Settling States), including
    Pennsylvania, entered into the MSA with PMs. The MSA settled litigation against
    the tobacco industry for recovery of the Settling States’ tobacco-related health-care
    costs.3 The tobacco manufacturers that did not participate in the MSA are known
    as nonparticipating manufacturers (NPMs).
    2
    PMs comprise two groups of tobacco manufacturers:            Original Participating
    Manufacturers (OPMs) and Subsequent Participating Manufacturers (SPMs). OPMs were the
    original tobacco companies to settle the claims filed against them by the states and enter the
    MSA; SPMs, which were not named in the original suit, entered the MSA at a later date. OPMs
    include Philip Morris USA, Inc., R.J. Reynolds Tobacco Company, and Lorillard Tobacco
    Company. SPMs participating in this appeal include Liggett Group LLC, Brown & Williamson
    Tobacco Corporation, and C/O Brown & Williamson Tobacco Corporation. OPMs and SPMs
    filed separate briefs.
    3
    The history of the tobacco litigation and details of the MSA agreement were discussed
    in depth in Commonwealth ex rel. Kane v. Philip Morris USA, Inc., 
    114 A.3d 37
    (Pa. Cmwlth.
    2015) (en banc).
    2
    Pursuant to the MSA, PMs agreed, among other things, to make
    substantial annual payments to the Settling States in perpetuity in exchange for
    release from civil liability. PMs do not make the payments directly to the Settling
    States; rather, PMs make a single, aggregate payment (MSA Payment) to an
    Independent Auditor in an amount calculated and determined by the Auditor. The
    Auditor then allocates the MSA Payment among the Settling States by making
    individual annual payments (Allocated Payment) in an amount based on each
    State’s pre-set allocable share.
    The annual MSA Payment is subject to a downward adjustment
    known as the NPM Adjustment, which provides the MSA Payment may be
    lowered by a percentage if it is determined PMs lost market share to NPMs as a
    result of PMs’ compliance with the MSA. The NPM Adjustment is divided among
    all of the Settling States, according to each State’s allocable share, in each year
    where the NPM Adjustment applies, unless the State meets the diligence exception.
    Section IX(d)(2)(A) of the MSA.
    Under the diligence exception, Settling States may avoid the NPM
    Adjustment if, during the year at issue, they “diligently enforced” a “qualifying
    statute,” which “effectively and fully neutralizes the cost disadvantages that [PMs]
    experience vis-à-vis [NPMs] within such Settling State as a result of the provisions
    of [the MSA].” Sections IX(d)(2)(B), (E) of the MSA. Pennsylvania’s qualifying
    statute is the Tobacco Settlement Agreement Act (TSAA).4
    4
    Act of June 22, 2000, P.L. 394, No. 54, as amended, 35 P.S. §§5671-5675.
    3
    Thus, a diligent State is spared an NPM Adjustment which reduces its
    Allocated Payment. In contrast, a non-diligent State receives a larger downward
    NPM Adjustment, and thus a smaller Allocated Payment, under the MSA’s
    Reallocation Provision. Specifically, the amount of the NPM Adjustment that
    would have otherwise applied to that diligent Settling State’s Allocated Payment is
    “reallocated among all [non-diligent] Settling States pro rata in proportion to their
    respective Allocable Shares ....” Section IX(d)(2)(C) of the MSA. As the number
    of non-diligent States decrease, the reallocation share of the NPM Adjustment
    increases, and vice versa. A non-diligent State’s potential NPM Adjustment is
    capped at the amount of its MSA Payment.
    The parties further agreed that “[a]ny dispute, controversy or claim
    arising out of or relating to calculations performed by, or any determinations made
    by, the Independent Auditor,” including NPM adjustments, “shall be submitted to
    binding arbitration.” Section XI(c) of the MSA. The arbitration panel shall be
    comprised of three neutral arbitrators. 
    Id. “Each of
    the two sides to the dispute
    shall select one arbitrator. The two arbitrators so selected shall select the third
    arbitrator.” 
    Id. Despite the
    enactment of qualifying statutes by all Settling States,
    PMs experienced market share loss attributable to their compliance with the MSA.
    The NPM Adjustments for 1999-2002 were resolved by settlement as to all
    Settling States, but the NPM Adjustment for 2003 (and subsequent years) was not.
    This case pertains to the NPM Adjustment dispute for 2004.
    4
    By way of further background, the 2003 dispute went to arbitration.
    Before arbitration commenced, Pennsylvania and other Settling States disputed
    whether the determination of a State’s diligent enforcement was subject to
    arbitration.   The Commonwealth filed a motion in the trial court seeking a
    declaration that it diligently enforced its qualifying statute in 2003, and that the
    Independent Auditor properly determined the 2003 NPM Adjustment should not be
    applied. In response, PMs filed a motion to compel arbitration, which the trial
    court (the Honorable William J. Manfredi) granted. Reproduced Record (R.R.) at
    191a.    Judge Manfredi concluded the MSA provided for arbitration, and it
    explained Pennsylvania, along with the other Settling States, were compelled to
    join in the selection of a single arbitrator.
    With the courts of every Settling State (but Montana) similarly
    ordering arbitration of the 2003 NPM Adjustment dispute, PMs and most of the
    Settling States, including Pennsylvania, entered an Agreement Regarding
    Arbitration (ARA). The parties agreed to multistate arbitration for the 2003 NPM
    Adjustment dispute. As part of the ARA, PMs agreed to reduce the liability of
    Settling States determined non-diligent, by 20%.       The ARA did not address
    arbitration terms for future years.
    With regard to the current 2004 NPM Adjustment dispute, in June
    2014, the Commonwealth filed a motion to compel single-state arbitration to
    determine its diligence for 2004 in the trial court. PMs responded by filing a
    motion to compel multistate arbitration. The parties briefed and argued their
    respective motions. Ultimately, the trial court denied the Commonwealth’s motion
    5
    and granted PMs’ motion. The trial court later issued an opinion detailing why all
    issues related to the 2004 NPM Adjustment dispute must be decided in one
    multistate arbitration proceeding.
    The Commonwealth filed an application to certify the orders for
    interlocutory appeal by permission, which the trial court denied.                         The
    Commonwealth also timely filed a notice of appeal from both orders, asserting
    appellate jurisdiction under Rules 311(a)(8) and 313 of the Pennsylvania Rules of
    Appellate Procedure. This Court directed the parties to address the appealability of
    the trial court’s orders in their principal briefs on the merits. Commonwealth Ct.
    Order, 4/17/15, at 1.
    II. Issues
    On appeal,5 the Commonwealth asserts this Court has jurisdiction to
    hear its interlocutory appeal as of right pursuant to Pa. R.A.P. 311(a)(8) and
    Section        7320(a)(1)     of     the      Uniform      Arbitration       Act      (UAA),
    42 Pa. C.S. §7320(a)(1), because the trial court denied its motion to compel
    arbitration.     The Commonwealth also maintains the trial court’s orders are
    appealable as collateral orders under Pa. R.A.P. 313.
    In turn, PMs argue the appeal should be quashed for lack of
    jurisdiction because the appeals are interlocutory and do not qualify for any
    5
    With regard to jurisdictional questions and other questions of law, our standard of
    review is de novo, and our scope of review is plenary. Mercury Trucking, Inc. v. Pa. Pub. Util.
    Comm'n, 
    55 A.3d 1056
    (Pa. 2012); Philip Morris.
    6
    exception. According to PMs, the trial court’s orders do not: (1) deny an arbitral
    resolution of the parties’ dispute, but merely resolve the manner of arbitration by
    compelling multistate arbitration; or (2) meet the definition of a collateral order.
    With regard to the merits, the Commonwealth contends the dispute
    over whether Pennsylvania diligently enforced the provisions of its qualifying
    statute must be arbitrated in a single-state proceeding with the Commonwealth on
    one side and the PMs on the other. In this dispute, the Commonwealth maintains it
    is not on the same side as other Settling States in challenging their own diligent
    enforcement.     The Commonwealth further claims that compelling multistate
    arbitration of this dispute is contrary to numerous MSA provisions designed to
    respect the sovereignty of the Commonwealth.
    III. Discussion
    A. Jurisdiction
    1. Contentions
    Before reaching the merits, we first address the issue of the Court’s
    jurisdiction to hear the Commonwealth’s appeal. The Commonwealth asserts that
    denials of motions to compel arbitration are immediately appealable as of right
    under Pa. R.A.P. 311(a)(8) and Section 7320(a)(1) of the UAA. Because the trial
    court denied the Commonwealth’s motion to compel single-state arbitration, the
    Commonwealth contends the order is plainly subject to immediate appeal as of
    right.
    In addition, the Commonwealth asserts both orders are properly
    subject to appeal as collateral orders under Pa. R.A.P. 313. Under Rule 313 an
    order is collateral if: (1) the order is separable from and collateral to the main cause
    7
    of action; (2) the right involved is too important to be denied review; and, (3) the
    question presented is such that, if review is postponed until final judgment in the
    case, the claim will be irreparably lost.
    In this regard, the Commonwealth contends the order directing
    multistate arbitration is collateral to the broader action itself. According to the
    Commonwealth, the main cause of action is the original suit against PMs for
    tobacco-related healthcare costs, which the parties settled in the MSA. This action
    arises from the terms of the MSA and the Commonwealth’s diligence
    responsibilities. The dispute of whether the arbitration should be a single-state
    proceeding between Pennsylvania and PMs plainly raises a collateral and separate
    question from the underlying merits of the main case.
    Next, the Commonwealth maintains the denial of its right to single-
    state arbitration raises important issues warranting immediate review. Although
    multiple Settling States joined the MSA, the agreement recognized that each State
    would maintain its own separate rights. Under the MSA, each State designates its
    own state court, which will be responsible for interpreting and enforcing the MSA
    in regard to disputes with that State. And each of those state courts is to look to its
    own state law. All of this was done out of recognition that each State is a
    sovereign entity and no State would allow itself to be subject to the courts or the
    law of a sister State. By ordering the Commonwealth to participate in multistate
    arbitration, the Commonwealth will be forced to forfeit many of its sovereign
    rights, including the independent selection of an arbitrator and negotiation of
    arbitration terms as these would be joint decisions made with sister States.
    8
    Arbitrators presiding over a multistate proceeding will apply generic legal
    principles as opposed to Pennsylvania law.
    Finally, the Commonwealth asserts this appeal is its only meaningful
    opportunity to challenge the trial court’s orders. A similar arbitration for the 2003
    NPM Adjustment lasted almost half a decade. If this Court declines review, the
    Commonwealth would be forced to arbitrate the 2004 issue through to its
    completion, spending hundreds of hours and millions of dollars in the process, only
    to try to reargue this point years later. In the meantime, the Commonwealth would
    have lost its sovereign right to arbitrate this issue separately. Thus, appeal of this
    collateral issue is necessary now.
    PMs respond the Commonwealth’s appeal must be quashed for lack of
    appellate jurisdiction. An appeal may be taken as of right from an order denying
    an application to compel arbitration. However, there is no corresponding statutory
    authority that permits a party to appeal an order that compels arbitration. Although
    the trial court denied the Commonwealth’s motion, it granted PMs’ motion. In so
    doing, the trial court compelled the parties to arbitrate in a multistate proceeding.
    The end result is the Commonwealth must participate in arbitration.               An
    interlocutory ruling that resolves merely the manner of arbitrating a dispute is not
    immediately appealable under Rule 311(a)(8).          Thus, the orders are clearly
    interlocutory and not immediately appealable.
    Moreover, PMs maintain the trial court’s orders are not appealable as
    collateral orders under Pa. R.A.P. 313 because they do not satisfy the Rule’s three
    9
    conditions, which are stringent. First, PMs contend the orders are not separable
    from and collateral to the main cause of action. Contrary to the Commonwealth’s
    assertions, the main cause of action is not the original suit brought against OPMs
    17 years ago, which was settled by the MSA and court-approved consent decree.
    The settlement and consent decree extinguished all underlying claims. The trial
    court’s jurisdiction at this point concerns only actions to enforce and apply the
    MSA. Indeed, that is the only jurisdiction the trial court has ever had over most of
    the SPMs, that were never parties to the original litigation, but that joined the MSA
    after settlement. The issue of whether the MSA requires single-state or multistate
    arbitration is not collateral to the main action, it is the main action.
    Second, PMs argue the right involved is not too important. To meet
    this test, the issue must involve deeply rooted public policy concerns, and it must
    affect someone other than the parties to the case themselves. The question here
    concerns merely the manner of arbitrating a dispute under the parties’ contract. It
    affects only the immediate litigants. Moreover, the question involved – the manner
    of arbitrating disputes under the MSA – is not a serious and unsettled question, and
    it does not impact public policy. Indeed, both this Court and the Supreme Court
    declined to hear an interlocutory appeal of the Judge Manfredi’s 2006 order
    compelling the Commonwealth to arbitrate rather than litigate the 2003 NPM
    Adjustment dispute – an issue far more important than the manner in which
    arbitration is conducted.
    And third, PMs contend the claim will not be irreparably lost if not
    immediately addressed. The Commonwealth admits it would have an opportunity,
    10
    after multistate arbitration, “to try to reargue” its single-state position. Appellee
    OPMs’ Br. at 22 (quoting Appellant’s Br. at 4). The temporary, but ultimately
    redressable, deprivation of a right is the opposite of an irreparable loss.
    In reply, the Commonwealth reasserts that the trial court denied its
    motion to compel single-state arbitration. A straightforward application of Section
    7320(a)(1) of the UAA and Pa. R.A.P. 311(a)(8) gives this Court jurisdiction. In
    addition, the Commonwealth responds it meets the three-part test for appeal of a
    collateral order. According to the Commonwealth, PMs never clearly explain what
    they think is the main cause of action. Regardless of whether the main cause of
    action is the underlying merits of the Commonwealth’s pre-settlement claims, the
    enforcement of the MSA as a whole, or the 2004 NPM Adjustment dispute, this
    appeal regarding the nature of the arbitration forum concerns a separate and
    collateral issue. As the issue implicates the Commonwealth’s sovereign rights, it is
    too important to be denied review. Finally, the Commonwealth asserts litigating a
    multistate arbitration is extremely expensive. Although the Commonwealth could
    later challenge the arbitrator’s ruling, the time and money spent arbitrating in the
    interim would be irreparably lost.
    2. Analysis
    a) Appeal of Interlocutory Orders as of Right
    Rule 311(a)(8) of the Pennsylvania Rules of Appellate Procedure
    governs interlocutory appeals as of right. It provides an appeal may be taken as of
    right from an order which is made immediately appealable by another statute or
    general rule. Pa. R.A.P. 311(a)(8). The statutory authorization is found in the
    UAA. Specifically, Section 7320 of the UAA provides:
    11
    (a) General rule.--An appeal may be taken from:
    (1) A court order denying an application to compel
    arbitration made under section 7304 (relating to
    proceedings to compel or stay arbitration).
    (2) A court order granting an application to stay
    arbitration made under section 7304(b).
    (3) A court order confirming or denying confirmation of
    an award.
    (4) A court order modifying or correcting an award.
    (5) A court order vacating an award without directing a
    rehearing.
    (6) A final judgment or decree of a court entered
    pursuant to the provisions of this subchapter.
    42 Pa. C.S. §7320 (emphasis added).     The UAA provides no corollary for an
    immediate appeal from an order compelling arbitration. Id.; Maleski v. Mutual
    Fire, Marine & Inland Ins. Co., 
    633 A.2d 1143
    (Pa. 1993).
    It is well-settled that an order compelling arbitration is not a final,
    appealable order. Maleski; Rosy v. Nat'l Grange Mut. Ins. Co., 
    771 A.2d 60
    (Pa.
    Super. 2001). When a trial court compels arbitration, the action is stayed pending
    arbitration, and the trial court retains jurisdiction and supervision over the
    arbitration. Maleski. The trial court does not address the merits of the parties’
    claims but merely transfers their dispute to another forum in accordance with the
    arbitration provision of the underlying contract.    Fastuca v. L.W. Molnar &
    Assocs., 
    950 A.2d 980
    (Pa. Super. 2008), aff'd, 
    10 A.3d 1230
    (Pa. 2011).
    Consequently, an appellate court lacks jurisdiction to determine the merits.
    Maleski.
    12
    As the Supreme Court explained, an order compelling arbitration is
    not appealable because “the parties are not forced ‘out of court.’” 
    Id. at 1145
    (quoting Gardner v. Prudential Ins. Co., 
    481 A.2d 654
    , 655 (Pa. Super. 1984)).
    “[A]n order compelling arbitration forces the parties into, rather than out of, court.”
    Id.; accord Rosy.
    Here, the trial court entered two orders:             one denying the
    Commonwealth’s motion to compel single-state arbitration, the other granting
    PMs’ motion to compel multistate arbitration. Although the trial court technically
    denied the Commonwealth’s motion, it did not force the parties out of court. See
    Maleski. The trial court’s orders merely directed the manner of arbitration. The
    end result is the matter is headed to arbitration. Thus, the trial court’s orders did
    not trigger the right of appeal under Pa. R.A.P. 311(a)(8) and Section 7320 of the
    UAA.
    b) Collateral Orders
    Next, we examine whether the trial court’s orders are appealable as
    collateral orders. Pursuant to Rule 313(a) of the Pennsylvania Rules of Appellate
    Procedure, “[a]n appeal may be taken as of right from a collateral order of an
    administrative agency or lower court.” Rule 313(b) defines a “collateral order” as
    one that is “[(1)] separable from and collateral to the main cause of action [(2)]
    where the right involved is too important to be denied review and [(3)] the question
    presented is such that if review is postponed until final judgment in the case, the
    claim will be irreparably lost.” Pa. R.A.P. 313(b) (clause numbers added).
    13
    The collateral order doctrine must be narrowly construed, and all three
    prongs must be met before collateral appellate review is allowed. Rae v. Pa.
    Funeral Dirs. Ass'n, 
    977 A.2d 1121
    (Pa. 2009); Mortg. Elec. Registration Sys., Inc.
    v. Malehorn, 
    16 A.3d 1138
    (Pa. Super. 2011). “Narrow application prevents the
    collateral order rule from subsuming the fundamental general precept that only
    final orders are appealable and from causing litigation to be interrupted and
    delayed by piecemeal review of trial court decisions.” Brophy v. Phila. Gas Works
    & Phila. Facilities Mgmt. Corp., 
    921 A.2d 80
    , 87 (Pa. Cmwlth. 2007). If “an order
    satisfies Rule 313's three-pronged test,” we “may exercise appellate jurisdiction
    where the order is not final.” 
    Rae, 977 A.2d at 1125
    .
    In determining whether an order is separable from and collateral to the
    main cause of action, the Court must first decide whether review of the order
    implicates the merits of the main cause of action. Commonwealth v. Wright, 
    78 A.3d 1070
    (Pa. 2013). In other words, we examine “whether the issues appealed
    can be addressed without analysis of the underlying claims on the merits.”
    
    Brophy, 921 A.2d at 87
    . Where review of the order in question does not implicate
    or affect the merits of the underlying dispute, it is separable from and collateral to
    the main cause of action.           Wright; see, e.g., Miravich v. Twp. of Exeter
    (Pa. Cmwlth., No. 2066 C.D. 2013, filed July 24, 2014), 
    2014 WL 3697542
    (the
    main cause of action was review of a preliminary subdivision plan but the issue of
    which tribunal should do so was separable therefrom).6
    6
    Section 414 of this Court's Internal Operating Procedures authorizes the citation of
    unreported panel decisions issued after January 15, 2008, for their persuasive value, but not as
    binding precedent. 210 Pa. Code §69.414.
    14
    As for the second prong, “[a]n issue is important if the interests that
    would potentially go unprotected without immediate appellate review of that issue
    are significant relative to the efficiency interests sought to be advanced by the final
    judgment rule.” Geniviva v. Frisk, 
    725 A.2d 1209
    , 1213 (Pa. 1999) (quoting In re
    Ford Motor Co., 
    110 F.3d 954
    , 959 (3d Cir. 1997)). “[I]t is not sufficient that the
    issue be important to the particular parties. Rather[,] it must involve rights deeply
    rooted in public policy going beyond the particular litigation at hand.” 
    Id. at 1214.
    Generally, the implication of due process concerns is too important to be denied
    review. See Commonwealth v. Sabula, 
    46 A.3d 1287
    (Pa. Super. 2012); see also
    Miravich (holding a party’s due process right to have the case heard before a
    tribunal having jurisdiction over the matter satisfied the second prong).
    Finally, with regard to the third prong of the analysis, we ask
    “whether a right is ‘adequately vindicable’ or ‘effectively reviewable.’” 
    Geniviva, 725 A.2d at 1213
    (quoting Digital Equip. Corp. v. Desktop Direct, Inc., 
    511 U.S. 863
    , 878-79 (1994)). This question “cannot be answered without a judgment about
    the value interests that would be lost through rigorous application of a final
    judgment requirement.” 
    Id. For instance,
    the substantial cost a party would incur
    in defending a claim may equate to an irreparable loss of a right to avoid the
    burden entirely. See Pridgen v. Parker Hannifin Corp., 
    905 A.2d 422
    (Pa. 2006);
    Yorty v. PJM Interconnection, L.L.C., 
    79 A.3d 655
    (Pa. Super. 2013).
    As discussed above, an order compelling arbitration is generally not
    appealable as an interlocutory order under Pa. R.A.P. 311(a)(8) and Section 7320
    of the UAA. However, such an order may be appealable as a collateral order in
    15
    limited circumstances. See, e.g., Gilyard v. Redev. Auth. of Phila., 
    780 A.2d 793
    (Pa. Cmwlth. 2001); U.S. Auto. Assoc. v. Shears, 
    692 A.2d 161
    (Pa. Super. 1997)
    (en banc) (USAA).
    In USAA, our Superior Court found an order compelling arbitration
    appealable as a collateral order under Rule 313. There, an automobile insurer for a
    car registered in another state sought a declaratory judgment that the policy
    provided no uninsured motorist (UM) benefits for a pedestrian injured by the
    insured’s stolen car in Pennsylvania. The pedestrian moved to compel arbitration
    of the dispute. The trial court determined the failure to provide coverage was
    actionable as a tort, and it compelled arbitration of the dispute.
    On appeal, the Superior Court determined that “without question, the
    order to compel arbitration [was] collateral to the main cause of action - the
    declaratory judgment action ....” 
    Id. at 163.
    Further, “the question of whether a
    court may order an out-of-state insurer to submit to arbitration on a newly-created
    tort [was] an important one.” 
    Id. Finally, the
    Court decided that “going forward
    with the arbitration will result in the loss of appellate review, which means that
    [insurer’s] claim under the declaratory judgment action will be irreparably lost.”
    
    Id. Thus, the
    Superior Court concluded the order was appealable even though it
    was interlocutory. 
    Id. Similarly, in
    Gilyard, we determined an appeal from a trial court order
    remanding an eminent domain matter to an arbitrator was appealable as a collateral
    order. The statute required that all appeals from the board of viewers be heard
    16
    only by a trial court, not by arbitration. The trial court’s remand order would have
    mooted the statutory provision barring arbitration. Thus, we concluded the right
    involved was too important to be denied review, and the claim would have been
    irreparably lost.
    Notwithstanding, unless all three prongs are met, we may not exercise
    appellate jurisdiction. Rae; Mortg. Elec.; Rosy. For example, in Rosy, passengers
    injured in a collision petitioned to compel the insurer of the vehicle in which they
    were riding to arbitrate their claims. The Court determined an order compelling
    arbitration was not an order separable from and collateral to the main cause of
    action. Unlike in USAA, Rosy did not involve a new cause of action, and the
    issues did not have wide-reaching impact that would otherwise evade review.
    Unlike in Gilyard, the order compelling arbitration in Rosy did not have the
    significant effect of mooting a statutory provision barring arbitration. Thus, the
    Court quashed the appeal because the order to arbitrate did not meet the collateral
    order test. Rosy.
    Here, we conclude the Commonwealth satisfies the collateral order
    test. First, with regard to separability, the main cause of action is the resolution of
    the 2004 NPM Adjustment dispute under the terms of the MSA. The main cause
    of action is not, as advanced by the Commonwealth, the underlying merits of the
    Commonwealth’s 1997 claims against the OPMs. This is because the parties
    settled the 1997 claims by entering into the MSA.
    17
    The 2004 NPM Adjustment dispute is essentially the same as the 2003
    NPM Adjustment dispute, in which the parties agreed:
    [T]here is a dispute between the Settling States and the
    [PMs] regarding whether under the [MSA] the [PMs] are
    entitled to a 2003 NPM Adjustment, including whether
    the Settling States diligently enforced [q]ualifying
    [s]tatutes during 2003 such that the 2003 NPM
    Adjustment does not apply to their Allocated Payments
    or to the corresponding MSA payments made by the
    [SPMs].
    R.R. at 200a (ARA). The trial court correctly identified the issue in the order
    granting PMs’ motion to compel multistate arbitration as “whether [PMs] are
    entitled to a 2004 NPM Adjustment, including the Commonwealth’s claim that it
    diligently enforced its [q]ualifying [s]tatute in 2004.” Tr. Ct. Order, 11/25/14.
    The trial court’s orders, specifying that Pennsylvania must participate
    in multistate arbitration with other Settling States, can be separated from the main
    cause of action.    Significantly, the determination of this appeal regarding the
    proper arbitration forum does not have the potential to decide any issues in the
    substantive merits of the case, such as diligent enforcement. In other words, the
    issue regarding the manner of arbitration may be addressed without any analysis of
    the main cause of action.
    As for the second prong, this appeal concerns whether and to what
    extent the Commonwealth surrendered its sovereign rights to take part in litigation
    over the NPM Adjustment dispute.         The Commonwealth’s inherent sovereign
    power to exercise jurisdiction over MSA disputes is implicated in this appeal. At
    18
    stake is the Commonwealth’s ability to proceed in single-state arbitration pursuant
    to state law, including the independent selection of its own arbitrator and
    negotiation of the arbitration terms. This implicates the Commonwealth’s due
    process right to have the matter heard before the tribunal having jurisdiction. See
    Miravich. By declining review at this juncture, the Commonwealth would be
    forced to participate in multistate arbitration before it could reassert its right to
    single-state arbitration. The issue is important not only to the parties of the MSA,
    but to the public at large because the sovereign power in our government belongs
    to the people. See Commonwealth ex rel. Attorney Gen., to Use of Sch. Dist. of
    Patton v. Barnett, 
    48 A. 976
    (Pa. 1901). Thus, the Commonwealth’s sovereign
    rights implicate broad public policy interests requiring immediate resolution.
    Finally, with regard to the third prong of the analysis, the
    Commonwealth concedes it will have an opportunity, after multistate arbitration, to
    reargue its single-state position. Appellant’s Br. at 4. Ordinarily, the temporary,
    but ultimately redressable, deprivation of a right does not constitute an irreparable
    loss. However, if this Court declines immediate review, the Commonwealth will
    be forced to proceed in relatively more complex, expensive arbitration through to
    its completion. In the process, it will exhaust substantial resources, and its right to
    avoid the enhanced burden will be lost. See Pridgen. Should the Commonwealth
    ultimately prevail on this issue in a later appeal, the victory will be hollow as it will
    have already arbitrated its diligence in a multistate proceeding.
    19
    For these reasons, we conclude the trial court’s orders are collateral
    orders under Pa. R.A.P. 313. Thus, this Court has appellate jurisdiction over the
    Commonwealth’s appeal.
    B. Multistate or Single-State Arbitration
    1. Contentions
    Turning to the merits of the appeal, the Commonwealth argues the
    MSA does not provide for multistate arbitration to decide its diligence.7
    Agreements to arbitrate must be strictly construed. Relying on Stolt-Nielsen S.A.
    v. AnimalFeeds International Corp., 
    599 U.S. 662
    (2010), the Commonwealth
    argues it cannot be compelled to submit to multistate arbitration without a clear
    statement in the agreement expressly authorizing multistate, consolidation or class
    arbitration. There is no contractual basis in the MSA for multistate arbitration. In
    fact, the Commonwealth asserts, PMs implicitly recognized there was no right to
    compel multistate arbitration when they agreed to reduce the liability of States
    found non-diligent to entice them to sign the ARA for the 2003 dispute.
    Specifically, Section XI(c) of the MSA requires arbitration between
    “two sides to the dispute.” According to the Commonwealth, the only dispute at
    issue is whether the Commonwealth diligently enforced its qualifying statute in
    2004. As to that dispute, there are only two sides: PMs and the Commonwealth.
    The trial court erred in determining the dispute was between PMs on one side and
    all Settling States on the other.
    7
    The Commonwealth no longer challenges that disputes related to the NPM Adjustment,
    including the Commonwealth’s defense of diligent enforcement of its qualifying statue, are
    subject to arbitration.
    20
    The Commonwealth maintains it is not on the same side as the other
    Settling States for purposes of its diligence determination. The MSA’s reallocation
    scheme pits state against state. This is because the more states that are found non-
    diligent, the lesser the share of the NPM Adjustment for non-diligent States.
    Conversely, the more states found diligent, the greater the burden for those found
    non-diligent.     As a result of this reallocation scheme, the Commonwealth’s
    interests are directly opposed to the interests of the other States. Thus, the Settling
    States are not on the “same side.”
    PMs counter the simple text of the MSA’s arbitration provision and
    the interconnectedness of the Settling States based on the MSA’s reallocation of
    the NPM Adjustment demand multistate arbitration.           As the trial court aptly
    recognized, the dispute is whether PMs are entitled to an NPM Adjustment for
    2004, regardless of whether a particular state diligently enforced its qualifying
    statute during that year.
    PMs explain, just as in 2003, the Independent Auditor refused to
    apply the NPM Adjustment for 2004 based on the Settling States’ objections.
    Indeed, all Settling States asked the Auditor to deny the NPM Adjustment for
    2004. Thus, the core dispute is whether the Auditor should have reduced PMs’
    MSA Payment for 2004. This dispute is more than whether a particular State can
    successfully claim it diligently enforced its qualifying statute in 2004, which is
    merely a subsidiary issue to the main dispute.
    21
    The main dispute that triggered the MSA’s arbitration provision is
    whether PMs are entitled to an NPM Adjustment for 2004. This is clearly a
    multistate dispute, and all Settling States are all on the same side with PMs on the
    other side.   This dispute necessarily embraces all subsidiary issues, including
    whether a particular State diligently enforced its qualifying statute. Although
    Settling States may have competing interests in the diligent enforcement issue,
    they are squarely aligned on the overarching main issue.
    As for the Commonwealth’s position that each State should have its
    own separate diligence arbitration, PMs maintain this would produce an absurdly
    complicated process for resolving all issues on the NPM Adjustment dispute. Such
    a divided process would hinder resolution of common issues, such as discovery
    procedures, the effect of bankruptcy of certain PMs, or the proper determination of
    interest on NPM Adjustment amounts.
    Moreover, PMs assert, the application of the diligent enforcement
    defense affects all other States.    Separate resolution of diligent enforcement
    disputes would be fraught with inequitable and inconsistent results and would
    likely result in the development of 52 sets of payment rules. States, affected by
    another State’s diligent enforcement arbitration would have the right to intervene.
    Intervention “would lead to an absurd result of a large number of separate
    arbitrations, and separate arbitration panels, being required to resolve a single
    year’s NPM Adjustment dispute that involves all of the same parties and same
    issues.” Appellee OPM’s Br. at 32 (quoting Tr. Ct., Slip Op., 2/23/15, at 26.).
    22
    According to PMs, the bottom line is that the 2004 NPM Adjustment
    is in dispute, regardless of the particular subsidiary issues that may arise out of or
    relate to it. This calls for multistate arbitration of the entire dispute, not piecemeal
    arbitration of its subparts. The reason is simple: a nationwide proceeding would
    permit all parties to attend and fully and effectively participate; a single set of
    discovery procedures would govern; and, common issues would be determined,
    with participation of all parties. A multistate arbitration ensures fairness for all
    parties. To hold otherwise is contrary to both the spirit and plain language of the
    MSA.
    Finally, contrary to the Commonwealth’s assertions, PMs maintain
    they did not implicitly recognize there was no right to compel multistate diligence
    arbitration. PMs concede they offered a financial incentive to the States to sign the
    ARA for the sole purpose of moving the process along as many states, including
    Pennsylvania fought arbitration.
    The Commonwealth replies the only relevant dispute at this time is
    whether it diligently enforced its qualifying statute.            In this regard, the
    Commonwealth does not share a “side” with any other Settling State. The general
    dispute over whether PMs are entitled to a NPM Adjustment for 2004 was already
    determined. What remains is whether the 2004 NPM Adjustment can be taken out
    of   the   Commonwealth’s       Allocated      Payment,   which    depends     on   the
    Commonwealth’s diligence.
    23
    The Commonwealth adds PMs’ concerns regarding single-state
    arbitration are significantly overstated. Twenty-four Settling States settled their
    diligence claims for 2004, and 17 others agreed to participate in multistate
    arbitration. Only a handful of states, including Pennsylvania, seek single-state
    arbitration.
    2. Analysis
    “[A]rbitration agreements are to be strictly construed and not
    extended by implication.” Highmark Inc. v. Hosp. Service Ass'n of N.E. Pa., 
    785 A.2d 93
    , 98 (Pa. Super. 2001).        In construing the language of an arbitration
    provision, courts rely on the rules of contract construction. Quiles v. Fin. Exch.
    Co., 
    879 A.2d 281
    (Pa. Super. 2005); Highmark.               Courts must adopt “an
    interpretation that gives paramount importance to the intent of the parties and
    ascribes the most reasonable, probable, and natural conduct to the parties.” 
    Quiles, 879 A.2d at 287
    (quoting 
    Highmark, 785 A.2d at 98
    ). “[T]he ultimate goal is to
    ascertain and give effect to the intent of the parties as reasonably manifested by the
    language of their written agreement.” 
    Id. (citation omitted).
    Mindful of these
    principles, we examine the MSA’s arbitration provision.
    Section XI(c) of the MSA provides, with emphasis added:
    Any dispute, controversy or claim arising out of or
    relating to calculations performed by, or any
    determinations made by, the Independent Auditor
    (including, without limitation, any dispute concerning the
    operation or application of any of the adjustments,
    reductions, offsets, carry-forwards and allocations
    described in subsection IX(j) or subsection XI(i)) shall be
    submitted to binding arbitration before a panel of three
    24
    neutral arbitrators, each of whom shall be a former
    Article III federal judge. ....
    Subsection IX(j) specifically addresses application of the NPM Adjustment. When
    such a dispute arises, “[e]ach of the two sides to the dispute shall select one
    arbitrator. The two arbitrators so selected shall select the third arbitrator.” Section
    XI(c) of the MSA (emphasis added).
    In addition, Section IX(d)(2) of the MSA provides:
    The NPM Adjustment ... shall apply to the Allocated
    Payments of all Settling States, except ... [a] Settling
    State’s Allocated Payment shall not be subject to an
    NPM Adjustment ... if such Settling State continuously
    had a [q]ualifying [s]tatute ... in full force and effect
    during the entire calendar year immediately preceding the
    year in which the payment in question is due, and
    diligently enforced the provisions of such statute during
    such entire calendar year ....
    Settling States retain jurisdiction for purposes of implementing and
    enforcing the MSA. See Sections II(p), VII(a), XVIII(n) & Ex. D of the MSA.
    For example, Section II(p) defines the “court” as “the respective court in each
    Settling State ....”   In Section VII(a), the parties agreed the court shall have
    jurisdiction for the purposes of implementing and enforcing the MSA. Section
    XVIII(n) provides the MSA “shall be governed by the laws of the relevant Settling
    State, without regard to the conflict of law rules of such Settling State.” Finally,
    the parties agreed state-court jurisdiction extended to the subject matters asserted
    in each Settling State’s originating lawsuits identified in Exhibit D to the MSA.
    Section VII(a) & Ex. D of the MSA.
    25
    However, these provisions do not affect the arbitration of certain
    disputes. The MSA specifically excepts arbitral disputes, namely disputes relating
    to the Independent Auditor’s calculations or determinations regarding the NPM
    Adjustment, from state-court litigation. Section VII(a) of the MSA (state-court
    litigation of MSA disputes is required “except as provided in ... §XI(c) ....”).
    Moreover, the issue of whether the NPM Adjustment disputes must be
    arbitrated was previously settled in connection with the 2003 dispute. Thus, in
    2006, the Commonwealth filed an action in the trial court seeking a declaration
    that it diligently enforced its qualifying statute in 2003, and it was entitled to its
    full allocable share of the MSA Payment for that year. PMs responded by filing a
    motion to compel arbitration, arguing the question of diligence was subject to
    arbitration per the terms of the MSA and should be resolved by a uniform set of
    rules.   Judge Manfredi agreed.       He determined the dispute was subject to
    arbitration under the MSA because it concerned the operation and application of
    the NPM Adjustment.        He therefore granted PMs’ motion and dismissed the
    Commonwealth’s motion.
    In reaching his conclusion, Judge Manfredi relied on the terms of the
    MSA, which he observed were the result of “lengthy negotiations between
    sophisticated parties.” R.R. at 197a. He opined:
    [W]hether there was diligent enforcement of the
    [q]ualifying [s]tatute is a dispute which the courts of the
    various settling states, generally, and this court, in
    particular, are most qualified to address. In an arbitration
    proceeding under the MSA, as many as 52 separate
    ‘Settling States’, with competing interests, will be
    compelled to join in the selection of a single arbitrator, to
    26
    sit with an arbitrator selected by the PMs, who share a
    unity of interest, and a third arbitrator selected by the first
    two. Moreover, the issue of ‘diligence’ in enforcement of
    the [q]ualifying [s]tatute is very much a local one. The
    vagaries of population size and distribution, geography,
    market penetration by NPMs, to name but a few factors,
    must be taken into account in determining whether a state
    has been diligent. Simply put: that which constitutes
    diligence in our sister state of North Dakota will
    assuredly be far different from diligence in our neighbor
    New York.
    That being said, the court reluctantly finds that the
    scale nonetheless tips in favor of arbitration. As noted,
    these were highly sophisticated parties, with the
    assistance and counsel of armies of highly paid lawyers.
    Under the circumstances presented, the hereinbefore
    cited legal authorities compel the court to leave the
    parties to their bargain, however, flawed and ill
    conceived it may be. ....
    R.R. at 198a (emphasis added). Although Judge Manfredi questioned the wisdom
    of multistate arbitration, he nevertheless determined that is how the parties agreed
    to resolve NPM Adjustment disputes.          Although Judge Manfredi’s comments
    regarding the multistate arbitration are non-binding dicta, his interpretation of the
    MSA is nevertheless persuasive.
    Here, as in 2003, the 2004 dispute arises out of the determinations
    made by the Independent Auditor regarding that year’s NPM Adjustment. More
    particularly, the dispute arose when the Independent Auditor refused to apply the
    NPM Adjustment at the request of the Settling States. Section XI(c) of the MSA,
    which mandates arbitration, clearly extends to “[a]ny dispute, controversy or claim
    arising out of or relating to ... any determinations made by, the Independent
    Auditor,” including the NPM Adjustment.
    27
    As to the NPM Adjustment dispute, there are “two sides” to the
    dispute. On one side, PMs contend they are entitled to an NPM Adjustment; on the
    other side, the Settling States oppose application of the NPM Adjustment.
    The Commonwealth concedes two preconditions for application of the
    NPM Adjustment were met for 2004 -- the PMs lost market share and the losses
    were attributable to market disadvantages as a result of the MSA. According to the
    Commonwealth, all that remains to be determined is whether a particular Settling
    State diligently enforced its qualifying statute, which it argues is a state-specific
    determination. In this regard, the Commonwealth claims it is not on the same side
    as the other Settling States. It argues the Independent Auditor’s post-diligence
    calculation of the NPM Adjustment is not a significant part of the dispute because
    the mathematical formula is set forth in the MSA.
    The Commonwealth’s argument is not persuasive.            The diligence
    dispute is just one part of the overall NPM Adjustment dispute.                   See
    Commonwealth ex rel. Kane v. Philip Morris USA, Inc., 
    114 A.3d 37
    (Pa. Cmwlth.
    2015) (en banc) (explaining operation of diligence exception to NPM Adjustment
    and the MSA’s Reallocation Provision).        The MSA’s arbitration provision is
    broadly written to encompass any controversy arising out of or related to the
    Independent Auditor’s determination and calculation of the NPM Adjustment.
    Section XI(c) of the MSA. By its own terms, the clause must be read broadly to
    include all claims related to such determinations and calculations. Whether a
    particular State diligently enforced its qualifying statute arises from and relates to
    the Independent Auditor’s NPM Adjustment determination that PMs are entitled to
    28
    an NPM Adjustment and the calculation as to how much. All of the Settling States
    that did not settle the 2004 NPM Adjustment dispute share the same interest in
    upholding the Independent Auditor’s refusal to apply the 2004 NPM Adjustment.
    Although we recognize that some Settling States may have competing
    interests as a result of the Reallocation Provision, this does not alter the fact that
    the non-settling Settling States are squarely aligned on the same side of the dispute
    over the Independent Auditor’s determination and calculation of the 2004 NPM
    Adjustment.     Intertwined within this dispute is each Settling State’s diligent
    enforcement.
    Moreover, the structure of the MSA supports the interpretation that
    the diligence issue cannot be treated as a separate, stand-alone dispute.
    Application of the diligent enforcement defense for any Settling State affects all
    other Settling States. As we recently explained in Philip Morris with regard to the
    Reallocation Provision of the MSA, “as the number of diligent states increase, the
    burden on non-diligent states increases. This is because an increase in the number
    of diligent states means that there is more adjustment reallocated among a smaller
    group.” 
    Id. at 44.
    Although Section IX(d)(2) provides the mathematical formula,
    the Independent Auditor cannot calculate the NPM Adjustment without knowing
    the diligence determinations of all Settling States. Because Settling States have an
    interest in the diligence determinations of other States, the issue of diligence as it
    relates to the calculation of the NPM Adjustment is a multistate concern, not just a
    State-specific issue.    As the trial court aptly observed, “because of the
    interconnectedness of the State’s diligent enforcement determinations, a single
    29
    decision maker has the best chances of producing consistent awards” for all
    interested states. Tr. Ct., Slip Op., at 25. Indeed, other courts grappling with this
    very issue have reached this same conclusion.8
    Although we recognize the challenges presented by multistate
    arbitration, we believe greater complications would occur by allowing fragmented
    single-state arbitration. As the trial court noted, allowing each Settling State to
    have its own diligence separately arbitrated would produce “an absurdly
    complicated process for resolving all the issues that NPM Adjustments present.”
    Tr. Ct., Slip Op., at 25.
    More particularly, the process would entail separate proceedings
    before separate arbitration panels in various locations, at varying speeds, to
    determine each State’s diligence for the purpose of calculating the NPM
    Adjustment. “And, because ... every State has an interest in the decision on
    8
    See Indiana, ex rel. Carter v. Philip Morris Tobacco Co., 
    879 N.E.2d 1212
    (Ind. Ct.
    App. 2008) (holding this nationwide effect creates the need for a single decision-maker to apply
    a single set of rules equally to each Settling State); Maryland v. Philip Morris Inc., 
    944 A.2d 1167
    , 1180 (Md. Ct. Spec. App. 2008) (reallocation makes having a single decision-maker
    vitally important); New Mexico ex rel. King v. Am. Tobacco Co., 
    194 P.3d 749
    (N.M. Ct. App.
    2008) (finding a compelling logic to having the disputes handled by a single arbitration panel,
    guided by one clearly articulated set of rules, where all parties can fully and effectively
    participate); New York v. Philip Morris Inc., 
    869 N.E.2d 636
    (N.Y. 2007) (a single panel can be
    guided by one clearly articulated set of rules that apply universally in a process where all parties
    can fully and effectively participate); but cf. Missouri v. Am. Tobacco Co. (Mo. Ct. App., No.
    ED 101542, filed September 22, 2015) 
    2015 WL 5576135
    (nationwide arbitration was not
    intended by the parties in drafting the MSA); Montana ex rel. Bullock v. Philip Morris, Inc., 
    217 P.3d 475
    (Mont. 2009) (PMs capable of negotiating a nationwide forum requirement, but no such
    language appears in the MSA).
    30
    diligence for every other State, each of ... [the non-settling] States would need to
    be able to intervene in every other State’s proceeding ... to protect itself.” 
    Id. at 26
    (internal quotation and citation omitted). “This would lead to an absurd result of a
    large number of separate arbitrations, and separate arbitration panels, being
    required to resolve a single year’s NPM Adjustment dispute that involves all of the
    same parties and issues.” 
    Id. The obvious
    disadvantage of separate, parallel
    proceedings is the risk of inconsistent results.9 Such complications can be readily
    avoided by a nationwide arbitration involving all interested parties, as envisioned
    by the MSA. Submitting the dispute to a single nationwide arbitration panel,
    chosen by the Settling States and PMs, and guided by a uniform set of rules,
    affords all interested parties the opportunity to be heard on a level playing field.
    Nevertheless, relying on Stolt-Nielsen, the Commonwealth maintains
    it cannot be compelled to submit to multistate arbitration without express
    authorization in the MSA. In Stolt-Nielsen, petitioners challenged the submission
    of their antitrust claims to class arbitration. The parties’ arbitration clause was
    silent with respect to class arbitration.              The parties stipulated there was no
    agreement authorizing class proceedings. Because of the stipulation, an intention
    to authorize class arbitration could not be inferred from the arbitration agreement.
    As a result, the U.S. Supreme Court determined the parties’ agreement did not
    9
    See Alabama ex rel. Riley v. Lorillard Tobacco Co., 
    1 So. 3d 1
    , 14 (Ala. 2008)
    (“conducting 52 separate arbitration proceedings would likely be fraught with the same type of
    inequitable and inconsistent results that would arise were the individual state courts to resolve
    this dispute.”); Connecticut v. Philip Morris, Inc., 
    905 A.2d 42
    , 47 (Conn. 2006) (“If
    interpretations of such rules were left exclusively to the courts of the individual settling states ...
    fifty-two different sets of payment rules might emerge ....”).
    31
    require class arbitration.   
    Id. Without agreement,
    the parties could not be
    compelled to submit their dispute to class arbitration. Id.; see Oxford Health Plans
    LLC v. Sutter, __ U.S. __, 
    133 S. Ct. 2064
    (2013).
    However, the Commonwealth’s reliance on                Stolt-Nielsen is
    misplaced. Significantly, there is no stipulation that the MSA precludes multistate
    arbitration. Although the MSA does not expressly specify multistate arbitration, a
    reasonable interpretation of the MSA is that the same arbitration panel selected to
    determine the parties’ NPM Adjustment dispute will determine all issues related
    thereto, including the Settling States’ diligent enforcement.       Unlike in Stolt-
    Nielsen, the parties’ intention to resolve all issues relating to and arising from the
    NPM Adjustment dispute by multistate arbitration can be inferred from the MSA.
    Moreover, this case does not involve a class action arbitration as in
    Stolt-Nielsen. In a class action, a tribunal adjudicates the rights of absent or
    unnamed parties based on evidence common to the class. See 
    id. There are
    no
    absent or unnamed parties because each Settling State participates as a party.
    In the same way, the Commonwealth argues it cannot be compelled to
    participate in “consolidated” arbitration without its express consent. However, we
    are not dealing with a court-ordered consolidation of multiple, separate
    arbitrations. Rather, the trial court compelled the Commonwealth to participate in
    the single, nationwide arbitration of the 2004 NPM Adjustment dispute and all
    issues related to and arising therefrom. Tr. Ct., Slip Op., at 29. More particularly,
    32
    the trial court ordered “the Commonwealth to participate in a single arbitration,
    under a single contract, regarding a single dispute.” 
    Id. at 28.
    Even if the trial court’s opinion could be viewed as consolidating
    “separate” arbitrations, arbitrations may be consolidated where the parties agreed
    to do so. See Certain Underwriters at Lloyd's v. Century Indem. Co. (E.D.Pa., No.
    CIV.A.05-2809, filed August 1, 2005) 
    2005 WL 1941652
    . Such agreements may
    be express or implied. Id.; see Children’s Hosp. of Phila. v. Am. Arbitration
    Ass’n, 
    331 A.2d 848
    (Pa. Super. 1974) (consent implied where multiple contracts
    contained identical arbitration clauses and the two arbitrations involved the
    allocation of a potentially shared responsibility). In this case, all parties to the
    MSA agreed to the arbitration of the NPM Adjustment disputes. The MSA evinces
    an intention that one nationwide arbitration panel will resolve such disputes.
    Finally, with regard to the Commonwealth’s argument that the ARA
    and multistate arbitration process used for the 2003 NPM Adjustment dispute did
    not set the precedent for disputes arising thereafter, we agree. The ARA dealt with
    the manner of arbitration for 2003 only.          The parties agreed to multistate
    arbitration, and they did not fully litigate the manner of arbitration. Although the
    ARA does not direct the manner of arbitration for 2004 or beyond, the MSA does.
    Both the structure and reasonable interpretation of the MSA require a uniform
    determination by a single, nationwide arbitration panel.
    33
    C. Sovereignty
    1. Contentions
    Next the Commonwealth maintains the use of a multistate process
    undermines its sovereign rights. The MSA contains numerous provisions designed
    to protect the sovereign rights of each Settling State.           The trial court’s
    determination that the MSA requires multistate arbitration is at odds with the
    recognition of sovereignty elsewhere in the MSA. The Commonwealth gave up
    only narrow slices of its sovereignty. The Court must protect those rights it did not
    relinquish.
    The Commonwealth reiterates its position that it agreed to arbitrate
    certain matters along with other parties only if they were on the same side of the
    dispute. The Commonwealth is not on the same side as other Settling States for
    purposes of the diligence determination. Consequently, it should not have to
    mutually choose one arbitrator with other States as though they were on the same
    side.
    According to the Commonwealth, multistate arbitration puts the PMs
    at an unfair advantage as they will be before the same panel of arbitrators on
    multiple occasions, whereas the Commonwealth will be there only once. Further,
    use of a multistate arbitration panel creates prejudice in terms of hearing time. In
    the 2003 arbitration, each state received only 11 hours to make their diligence case
    before the arbitration panel. This was because the use of one arbitration panel to
    hear 15 different cases necessitated shorter hearing times.
    34
    Finally, the Commonwealth asserts, Pennsylvania’s law, TSAA, is
    different from other States’ qualifying statutes.10 Instead of focusing on each
    State’s laws, efforts and particular circumstances, a multistate arbitration panel is
    placed in a situation where comparisons are inherent. It serves little purpose
    comparing and contrasting State’s enforcement efforts. Indeed, comparisons are
    inappropriate when each State’s diligence is analyzed according to that State’s
    particular circumstances.    Yet, in multistate arbitration, comparisons between
    States are inevitable and inherently unfair.
    PMs counter the relevant issue is what Section XI(c) of the MSA
    means in the context of a dispute over the Independent Auditor’s determination
    regarding the NPM Adjustment.         The arbitration provision dictates that NPM
    Adjustment disputes and all issues related thereto be decided by arbitration. All
    parties, including Pennsylvania, agreed to these terms. Although other provisions
    state that the MSA is governed by the laws of the relevant Settling State, the
    arbitration for payment-related disputes is not one of them. See Sections VII &
    XI(c) of the MSA.
    By invoking sovereignty, the Commonwealth disregards the
    provisions of the MSA to which it voluntarily agreed, and it argues a different,
    special set of rules should apply to it.            However, PMs advance, the
    Commonwealth’s sovereignty is respected when the courts follow the clear terms
    of the MSA and reasonable interpretation of those terms. Moreover, no general
    10
    The Commonwealth does not explain how the TSAA differs from other States’
    qualifying statutes.
    35
    state sovereignty principle trumps the express language to which the
    Commonwealth agreed. Although there may be some difference between States’
    qualifying statutes, all are based on the MSA’s model qualifying statute.
    Like any other party to a contract, the Commonwealth is bound by
    and should be held to its agreement. Multistate arbitration is the only reasonable
    interpretation of the MSA based on its plain terms and structure of the MSA.
    The Commonwealth replies it is not asking the Court to change the
    language of the contract to protect its sovereignty. Rather, it asks this Court to
    enforce the plain meaning of “[e]ach side of the two sides to the dispute.” Section
    XI(c) of the MSA.
    2. Analysis
    The MSA recognizes and protects the Settling States’ sovereign rights
    in numerous respects. Specifically, under the MSA, each State designates its own
    state court, which is responsible for implementing and enforcing the MSA with
    regard to disputes within that State. See Sections II(p), VII(a), XVIII(n) & Ex. D
    of the MSA. And each of those state courts is to look to its own state law. See 
    id. The effect
    is that no Settling State is subject to the courts or the law of a sister
    State. Further, Section XVIII(j) of the MSA requires that any amendment to the
    MSA must be executed by all States affected by the amendment. See Philip
    Morris.
    As discussed above, the parties did not agree to resolve all disputes in
    state court.    The MSA’s arbitration provision dictates that NPM Adjustment
    36
    disputes, and all issues arising from and related thereto, are to be decided by
    arbitration.    Section XI(c) of the MSA; see Section VII(a) of the MSA.
    Specifically, Section XI(c) of the MSA requires “[a]ny dispute, controversy, or
    claim arising out of or relating to” the payment determinations or calculations
    “made by ... the Independent Auditor” must be arbitrated, including “any dispute
    concerning the operation or application of any of the adjustments.” Section XI(c)
    further provides: “Each of the two sides to the dispute shall select one arbitrator.”
    
    Id. As the
    trial court aptly noted, “it is the plain text of that provision that makes
    the nature of the arbitration dependent on the nature of the dispute, not some state-
    by-state default.” Tr. Ct., Slip Op., at 34. The nature of the dispute is whether
    PMs are entitled to an NPM Adjustment for 2004, not merely one State’s diligent
    enforcement defense for that year. 
    Id. As to
    this dispute, there are two sides –
    Settling States on one, PMs on the other. Thus, multistate arbitration is the only
    reasonable interpretation of the MSA’s terms.
    Contrary to the Commonwealth’s assertions, its sovereign rights are
    not undermined by the application of multistate arbitration. The Commonwealth
    voluntarily agreed to the terms of the MSA after “lengthy negotiations between
    sophisticated parties.” R.R. at 197a. Its sovereignty is respected when the courts
    follow the clear terms of the MSA and a reasonable interpretation of them.
    IV. Conclusion
    In sum, this Court has jurisdiction over the Commonwealth’s appeal
    of the trial court’s orders as they are collateral orders. As to the merits of the
    Commonwealth’s appeal, we conclude multistate arbitration of the NPM
    37
    Adjustment dispute, which includes whether the Commonwealth diligently
    enforced its qualifying statute, is the only reasonable interpretation of the MSA.
    We reject the Commonwealth’s sovereign rights argument because the
    Commonwealth willingly agreed to the terms of the MSA and a reasonable
    interpretation of them.
    Accordingly, we affirm the orders of the trial court compelling the
    Commonwealth to participate in multistate arbitration.
    ROBERT SIMPSON, Judge
    Judges Cohn Jubelirer and McCullough did not participate in the decision in this
    case.
    38
    IN THE COMMONWEALTH COURT OF PENNSYLVANIA
    Commonwealth of Pennsylvania           :
    By Kathleen G. Kane, Attorney General, :
    Appellant    :
    :
    v.                        :   No. 2422 C.D. 2014
    :
    Philip Morris, Inc.; RJ Reynolds       :
    Tobacco Company; Brown &               :
    Williamson Tobacco Corporation;        :
    B.A.T. Industries, PLC; The American :
    Tobacco Company, Inc.; C/O Brown & :
    Williamson Tobacco Corporation;        :
    Lorillard Tobacco Company; Liggett     :
    Group, Inc.; United States Tobacco     :
    Company; The Tobacco Institute, Inc.; :
    The Council For Tobacco Research       :
    U.S.A., Inc.; Smokeless Tobacco        :
    Council, Inc., and Hill & Knowlton,    :
    Inc.                                   :
    ORDER
    AND NOW, this 18th day of November, 2015, the orders of the Court
    of Common Pleas of Philadelphia County are AFFIRMED.
    ROBERT SIMPSON, Judge
    

Document Info

Docket Number: 2422 C.D. 2014

Citation Numbers: 128 A.3d 334, 2015 Pa. Commw. LEXIS 508, 2015 WL 7264569

Judges: Pellegrini, Simpson, Friedman, Jubelirer, McCtjllough

Filed Date: 11/18/2015

Precedential Status: Precedential

Modified Date: 10/26/2024

Authorities (20)

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Pridgen v. Parker Hannifin Corp. , 588 Pa. 405 ( 2006 )

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State v. Philip Morris Inc. , 179 Md. App. 140 ( 2008 )

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Fastuca v. L.W. Molnar & Associates , 608 Pa. 187 ( 2011 )

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State Ex Rel. Carter v. Philip Morris Tobacco Co. , 2008 Ind. App. LEXIS 122 ( 2008 )

Mortgage Electronic Registration Systems, Inc. v. Malehorn , 2011 Pa. Super. 37 ( 2011 )

Brophy v. Philadelphia Gas Works & Philadelphia Facilities ... , 2007 Pa. Commw. LEXIS 162 ( 2007 )

Rae v. PA FUNERAL DIRECTORS ASS'N , 977 A.2d 1121 ( 2009 )

Oxford Health Plans LLC v. Sutter , 133 S. Ct. 2064 ( 2013 )

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