Weinar, M. v. Lex, W. , 176 A.3d 907 ( 2017 )

J-A10030-17
2017 PA Super 398MARVIN WEINAR IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
WILLIAM LEX
Appellant No. 1467 EDA 2016
Appeal from the Judgment Entered July 5, 2016
In the Court of Common Pleas of Chester County
Civil Division at No(s): 2015-08168
MARVIN WEINAR IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
WILLIAM LEX
Appellee No. 1615 EDA 2016
Appeal from the Judgment Entered July 5, 2016
In the Court of Common Pleas of Chester County
Civil Division at No(s): 2015-CV-08168
BEFORE: DUBOW, J., SOLANO, J., and FORD ELLIOTT, P.J.E.
OPINION BY SOLANO, J.: FILED DECEMBER 15, 2017
Before the Court are consolidated cross-appeals filed by William F. Lex
and Dr. Marvin Weinar from the trial court’s April 28, 2016 order (1)
granting Weinar’s petition to confirm an arbitration award, and (2)
sustaining Lex’s preliminary objections and dismissing Weinar’s second
amended complaint. The appeals arise out of Weinar’s efforts to enforce an
arbitration award that was rendered in his favor on February 14, 2013. After
unsuccessfully seeking to enforce the award in New York state and federal
courts and in a federal court in Pennsylvania, Weinar initiated this action in
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the Chester County Court of Common Pleas, filing both a petition to enforce
the arbitration award under Pennsylvania law and a complaint asserting
numerous claims against Lex relating to Lex’s failure to pay the arbitration
award. The trial court granted Weinar’s petition to enforce the arbitration
award and dismissed his complaint. We affirm the granting of the petition,
vacate the dismissal of the complaint, and remand for further proceedings.
Lex, while working as a securities broker for McGinn Smith & Co., sold
Weinar approximately $400,000 in notes. In April of 2010, the Securities
and Exchange Commission filed an action against McGinn Smith, its
principals, and the issuers of all the notes sold to Weinar.1 As a result of this
and other legal actions, the notes became worthless. On December 14,
2000, Weinar filed a statement of claim against Lex pursuant to the Code of
Arbitration Procedure of the Financial Institution Regulatory Authority
(FINRA).2 Weinar asserted that Lex acted negligently and breached various
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1 The principals of McGinn Smith were accused of diverting money from the
notes to their personal uses. McGinn Smith eventually was placed in
receivership.
2 FINRA Code of Arbitration Procedure Rule 12200 provides:
Parties must arbitrate a dispute under the Code if:
• Arbitration under the Code is either:
(1) Required by a written agreement, or
(2) Requested by the customer;
• The dispute is between a customer and a member or
associated person of a member; and
• The dispute arises in connection with the business activities of
the member or the associated person, except disputes involving
the insurance business activities of a member that is also an
insurance company.
(Footnote Continued Next Page)
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fiduciary and contractual duties by, among other things, recommending
investments that were unsuitable to Weinar’s objectives and not properly
diversified. On February 14, 2013, after an arbitration proceeding in
Pennsylvania, a panel of arbitrators issued an award in favor of Weinar that
included $270,000 in compensatory damages, plus interest at a rate of 6%,
compounded annually, and fees of $7,862.50.
That same day, Weinar filed a petition to enforce the arbitration award
in a New York state court under Section 7510 of the New York Civil Practice
Law and Rules.3 Lex removed the action to the U.S. District Court for the
Southern District of New York on the basis of diversity jurisdiction and then
filed a motion to dismiss the case for lack of personal jurisdiction.
On April 3, 2013, while Lex’s motion to dismiss was pending in the
Southern District of New York, Lex filed a petition in the U.S. District Court
for the Eastern District of Pennsylvania (the “EDPA Action”), in which he
sought to vacate the arbitration award under the Federal Arbitration Act
(Footnote Continued) _______________________
There are references to a customer agreement and multiple subscription
agreements in the reproduced record. See, e.g., Weinar’s Pet. to Confirm
an Arbitration Award at ¶¶ 12, 17, Weinar v. Lex, No. 650495/2013 (N.Y.
Sup. Ct., Feb. 14, 2013). However, we note with disapproval that the
written agreement(s) themselves are not included in the certified record or
the reproduced record. The arbitrability of the parties’ dispute under the
FINRA Code is not an issue in this appeal; the arbitrators’ award finds that
Lex was “required to submit to arbitration pursuant to the Code” and “is
bound by the determination of the Panel on all issues submitted.” Award at
2.
3 That statute provides, “The court shall confirm an award upon application
of a party made within one year after its delivery to him, unless the award is
vacated or modified upon a ground specified in section 7511.” N.Y. C.P.L.R.
§ 7510.
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(FAA). The EDPA Action was stayed until January 23, 2014, when the New
York federal district court dismissed the New York action for lack of personal
jurisdiction over Lex. On May 22, 2014, Weinar filed a cross-petition in the
EDPA action to confirm the arbitration award. In the cross-petition, Weinar
urged the court to apply Pennsylvania law, which “does not impose a time
limit on motions to confirm an arbitration award.” Weinar’s Cross-Pet. to
Confirm Arbitration Award at ¶ 12.
On March 31, 2015, the Honorable Norma L. Shapiro entered an order
in the EDPA action granting in part and denying in part Lex’s petition to
vacate the arbitration award. See Lex v. Weinar, Civ. A. No. 13-mc-96,
2015 WL 1455810 (E.D. Pa. Mar. 31, 2015).4 Judge Shapiro also denied as
untimely Weinar’s cross-petition to confirm the award. She explained that
even though federal jurisdiction in the case was based on diversity of
citizenship,5 the case was “brought under the FAA,” and she was required to
apply the FAA’s provisions, rather than state law, to an FAA case brought in
federal court because the parties had not contractually opted out of the
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4 Judge Shapiro vacated the award of compound interest to Weinar and held
that he should receive only simple interest. The court otherwise denied
Lex’s petition to vacate the award. See Lex, 2015 WL 1455810, at *6.
5 Lex alleged that the court had jurisdiction both because of the parties’
diverse citizenship, 28 U.S.C. § 1332, and because he presented a federal
claim under the FAA. Judge Shapiro held that “the FAA does not constitute
an independent basis for federal jurisdiction,” but that the parties’ diversity
provided a jurisdictional basis to hear a claim based on the FAA. Lex, 2015
WL 1455810, at *2; see Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 25 n.32 (1983).
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FAA’s requirements. Id. at *2.6 She held that Weinar’s May 22, 2014
cross-petition to confirm the February 14, 2013 arbitration award was
untimely because “[t]he FAA one-year deadline for moving to confirm the
arbitration award” applied. Id. at *3, citing FAA § 9, 9 U.S.C. § 9 (stating
that any party may apply for an order confirming an arbitration award “at
any time within one year after the award is made”).
Weinar filed a motion for reconsideration of Judge Shapiro’s March 31,
2015 order, requesting that Judge Shapiro confirm the arbitration award as
modified by the March 31, 2015 order or remand the matter to FINRA
Dispute Resolution for issuance of an amended award with recalculated
interest in accordance with the March 31, 2015 order. On May 20, 2015,
Judge Shapiro denied the motion for reconsideration, reiterating that
Weinar’s petition to confirm was untimely under the FAA and stating that the
March 31, 2015 order left no confusion as to the calculation of interest.
Weinar did not appeal from Judge Shapiro’s March 31, 2015 or May 20, 2015
orders.
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6 Judge Shapiro based this conclusion on Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395, 405 (1967), in which the Supreme Court
held that the FAA establishes binding federal rules and procedures with
which federal courts are obligated to comply. In a portion of her opinion
titled “Choice of Law,” Judge Shapiro summarized: “The FAA establishes a
uniform federal law over contracts falling within its scope. Although a
federal court sitting in diversity would normally be bound by state law under
Erie Railroad Co. v. Tomkins, 304 U.S. 64, 78 (1938), federal courts must
apply the provisions of the FAA in a diversity case where no federal question
is otherwise involved.” 2015 WL 1455810, at *2 (some citations omitted).
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On September 9, 2015, Weinar instituted the current action by filing a
complaint against Lex in the Court of Common Pleas of Chester County,
based on Lex’s failure to pay the arbitration award. In his second amended
complaint, Weinar asserted the following claims: (1) breach of contract, by
failing to “abide by and perform” the arbitration award; (2) conversion, by
retaining money out of which Weinar’s demand for payment of the
arbitration award could be satisfied; (3) unjust enrichment; (4) confirmation
of the arbitration award; and (5) a request for a declaratory judgment
regarding the amount of the arbitration award and any judgment to be
entered upon it. In addition to declaratory relief, Weinar sought damages of
$270,000, plus interest, fees, and “such further relief as [the trial court]
deems just and proper.” Second Am. Compl. at 5, 6, 8.
Lex filed preliminary objections to Weinar’s second amended
complaint, arguing that, because of the EDPA ruling, the requested relief
was barred in its entirety by the doctrine of res judicata. In addition, Lex
contended that Weinar failed to state a claim for breach of contract;
Weinar’s conversion claim was barred by the gist of the action doctrine and
failed to state a claim upon which relief could be granted; Weinar’s unjust
enrichment claim was barred by res judicata and/or collateral estoppel;
Weinar’s claim for confirmation of the award should be dismissed because an
application for confirmation of an arbitration award must be made by
petition; and Weinar could not obtain a declaratory judgment on an
uncontroverted and finally litigated issue. Weinar responded by filing
preliminary objections to Lex’s preliminary objections, arguing that (1)
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Pennsylvania law does not permit preliminary objections based on res
judicata or collateral estoppel; (2) Pennsylvania law does not permit
preliminary objections based on matters outside the complaint; (3) Weinar’s
complaint was not barred by res judicata; (4) Lex’s objections to Weinar’s
breach of contract and conversion claims were impermissible “speaking
demurrers”; and (5) Lex’s objection to Weinar’s claim for confirmation of the
award was moot in light of Weinar’s filing of a petition to confirm the award.7
Meanwhile, on December 15, 2015, Weinar filed a petition to confirm
the arbitration award under Section 7342(b) of the Judicial Code, which
provides that “the court shall enter an order confirming the award and shall
enter a judgment or decree in conformity with the order” if a party applies
for such relief “more than 30 days after an award is made.” See 42 Pa. C.S.
§ 7342(b). Lex opposed that petition, arguing that it was barred by res
judicata and that the FAA’s one-year statute of limitations for confirming an
arbitration award preempted Section 7342(b), which contains no statute of
limitations.
The trial court held a hearing on April 15, 2016,8 and both parties
submitted post-hearing letters to the court. On April 28, 2016, the trial
court issued an opinion and order (1) granting Weinar’s petition to confirm
the arbitration award, and (2) sustaining Lex’s preliminary objections and
____________________________________________
7 Weinar listed eight separate arguments. We have consolidated them here
for simplicity.
8 There are no notes of testimony from the April 15, 2016 hearing in the
certified or reproduced record.
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dismissing Weinar’s second amended complaint. The trial court did not rule
on Weinar’s preliminary objections to Lex’s preliminary objections.
The trial court held that “the FAA does not preempt the Pennsylvania
Arbitration Statutes regarding the time limit within which a party must
petition to confirm an arbitration award.” Trial Ct. Op., 4/28/16, at 7. The
court reasoned that the lack of a one-year time limit for confirming an
arbitration award under 42 Pa. C.S. § 7342(b) was a mere procedural matter
that did not interfere with the federal policy of ensuring enforceability of
arbitration agreements. Id. at 10-12. The trial court further explained that
it sustained Lex’s preliminary objections because Weinar’s second amended
complaint “merely seeks to re-litigate the arbitration.” Id. at 13.
On May 12, 2016 Lex filed a notice of appeal from the trial court’s
confirmation of the arbitration award. On May 26, 2016, Weinar filed a
notice of cross-appeal from the order sustaining Lex’s preliminary objections
to Weinar’s second amended complaint.
In a June 22, 2016 opinion issued in response to Lex’s appeal from the
confirmation ruling, the trial court explained that it rejected Lex’s res
judicata argument because there was no identity of the two causes of action
(the EDPA action and the present action) and it rejected Lex’s collateral
estoppel argument because the EDPA court “never evaluated whether the
petition to confirm would have been granted under Pennsylvania law.” Trial
Ct. Op., 6/22/16, at 13-14. In an opinion issued on July 13, 2016, in
response to Weinar’s appeal from the dismissal of his complaint, the court
reasoned that Weinar’s breach of contract claim was barred by res judicata,
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his unjust enrichment claim was barred by collateral estoppel, and his
conversion claim was barred by the “gist of the action” doctrine. Trial Ct.
Op., 7/13/16, at 7-9.
The trial court entered judgment on July 5, 2016. Under Pa.R.A.P.
905(a)(5), the previously filed notices of appeal are treated as if filed
following the entry of judgment. The cross-appeals therefore are now
properly before this Court.
NO. 1467 EDA 2016
(LEX’S APPEAL FROM THE CONFIRMATION OF THE ARBITRATION AWARD)
In his appeal, Lex raises the following issues:
1. In light of the 2011 U.S. Supreme Court case AT&T Mobility
LLC v. Concepcion, 563 U.S. 333 (2011)[,] which holds that
states cannot enforce laws or “procedures inconsistent with the
FAA,” did the [t]rial [c]ourt err by applying Pennsylvania’s
unlimited statute of limitations to enforce an arbitration award
when this statute of limitations is inconsistent with the one-year
time period prescribed by the FAA?
2. Did the [t]rial court err in its finding that the unlimited statute
of limitations provided by 42 Pa.C.S. § 7342(b) does not conflict
with the policies and goals of the FAA, even though the FAA has
an identified goal of facilitating expeditious resolution of
disputes?
3. In determining whether Pennsylvania’s statute of limitations
to confirm an arbitration was preempted by the FAA, was it an
error for the [t]rial [c]ourt to reject preemption based upon a
purported distinction as to whether the issue was “procedural” as
opposed to “substantive[”]?
4. Was it error for the [t]rial [c]ourt to rely upon pre-
Concepcion decisions to reach its conclusion that the FAA did
not preempt 42 Pa.C.S. § 7342(b)?
5. Does the doctrine of res judicata bar a court from considering
the timeliness of the filing of a petition where that same issue
has already been finally adjudicated by a court of competent
jurisdiction?
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Lex’s Brief at 2.
Lex’s issues challenge the trial court’s confirmation of the arbitration
award in favor of Weinar. Arbitration is a non-judicial means of resolving
disputes. Although parties may voluntarily agree to comply with an
arbitration award, enforcement of the award cannot be compelled unless the
prevailing party has the award “confirmed” in a judicial proceeding that then
gives the arbitrators’ ruling the effect of a court judgment. See Thomas H.
Oehmke, COMMERCIAL ARBITRATION § 133:1 (3d ed. 2017).
Both federal and Pennsylvania law provide means by which an
arbitration award may be confirmed. The relevant federal statute is the FAA,
which applies to “a written agreement to arbitrate ‘in any maritime
transaction or a contract evidencing a transaction involving commerce.’”
Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983) (quoting FAA, 9 U.S.C. § 2). Neither Lex nor Weinar disputes that
their agreement to arbitrate under the FINRA Code is subject to the FAA.
See Moscatiello v. Hilliard, 939 A.2d 325, 326 (Pa. 2007) (noting that FAA
governs arbitration under rules of the National Association of Securities
Dealers (FINRA’s predecessor)). The FAA “create[s] a body of federal
substantive law of arbitrability, applicable to any arbitration agreement
within the coverage of the Act.” Moses H. Cone, 460 U.S. at 24. One of its
provisions, Section 9, authorizes “any party to the arbitration” to apply to a
state or federal court for an order confirming an arbitration award. 9 U.S.C.
§ 9. Section 13 provides:
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The judgment so entered shall have the same force and effect, in
all respects, as, and be subject to all the provisions of law
relating to, a judgment in an action; and it may be enforced as if
it had been rendered in an action in the court in which it is
entered.
9 U.S.C. § 13.
Although, as discussed below, the FAA robustly preempts any state
law that interferes with the enforceability of an agreement to arbitrate, it
creates “no federal policy favoring arbitration under a certain set of
procedural rules,” Volt Info. Sci. v. Bd. of Trs. of Leland Stanford Junior
Univ., 489 U.S. 468, 476 (1989), and leaves the parties free to seek
enforcement of their arbitration award under state law, rather than the FAA.
Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 590 (2008).
Pennsylvania makes available two statutory schemes for arbitration of cases
not filed in court. One, the Uniform Arbitration Act, 42 Pa. C.S. §§ 7301-
7320, governs arbitrations under agreements that “expressly provide[]” that
they are subject to that Act “or any other similar statute.” 42 Pa. C.S.
§ 7302(a). All other arbitration agreements are “conclusively presumed” to
be governed by what the Judicial Code calls “common law arbitration” under
42 Pa. C.S. §§ 7341-7342. See Moscatiello, 939 A.2d at 327. No party to
this case contends that the arbitration agreement at issue here falls under
the Uniform Act; accordingly, the Judicial Code’s “common law” provisions
apply to this case. Among the “common law” provisions is Section 7342(b),
which states that if a party makes an appropriate application, “the court
shall enter an order confirming the award and shall enter a judgment or
decree in conformity with the order.” 42 Pa. C.S. § 7342(b).
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After unsuccessfully seeking confirmation of the award in federal court
under the FAA, Weinar successfully applied for confirmation in the Chester
County Court of Common Pleas under Section 7342(b). Lex now contends
that the trial court erred in confirming the award because the federal order
declining confirmation precluded confirmation by the court in Chester County
and, alternatively, because confirmation is barred by the FAA’s one-year
statute of limitations, which preempts the longer period for filing a
confirmation application under Pennsylvania law.
“A trial court order confirming a common law arbitration award will be
reversed only for an abuse of discretion or an error of law.” Sage v.
Greenspan, 765 A.2d 1139, 1142 (Pa. Super. 2000), appeal denied, 784
A.2d 119 (Pa. 2001). As we discuss below, each of Lex’s contentions
presents a question of law as to which our standard of review is de novo.
Res Judicata
(Lex’s issue 5)
Because a court should avoid constitutional issues if possible, see
Commonwealth v. Karetny, 880 A.2d 505, 519 (Pa. 2005), and because
Lex’s preemption issues ultimately are grounded in the U.S. Constitution’s
Supremacy Clause, Art. VI cl. 2, we begin our analysis with Lex’s fifth issue,
in which Lex contends that confirmation of the arbitration award under
Pennsylvania law is barred by res judicata (claim preclusion) as a result of
Judge Shapiro’s decision in the EDPA action.9 The trial court held that res
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9 Although Lex also raised collateral estoppel (issue preclusion) in the trial
court, in his appeal he argues only that res judicata applies.
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judicata did not apply because there was no identity of the two causes of
action (the cause of action in the EDPA case and the cause of action in the
instant case). Trial Ct. Op., 6/22/16, at 13.
We have explained the res judicata doctrine as follows:
The doctrine of res judicata prevents a party from instituting
litigation that has been the subject of a lawsuit. We explained
the concept in Stoeckinger v. Presidential Financial Corp. of
Delaware Valley, 948 A.2d 828, 832 n.2 (Pa. Super. 2008)
(footnote omitted):
“Res judicata” means “a thing adjudged” or a matter
settled by judgment. Traditionally, American courts have
used the term res judicata to indicate claim preclusion,
i.e., the rule that a final judgment rendered by a court of
competent jurisdiction on the merits is conclusive as to the
rights of the parties and constitutes for them an absolute
bar to a subsequent action involving the same claim,
demand or cause of action.
Robinson Coal Co. v. Goodall, 72 A.3d 685, 689 (Pa. Super. 2013).10
Preclusion is a question of law, and our review is de novo. See Rickard v.
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10 In Robinson, we continued by outlining the requirements for application
of res judicata under Pennsylvania law:
Application of the doctrine of res judicata as an absolute bar to a
subsequent action requires that the two actions possess the
following common elements: (1) identity of the thing sued upon;
(2) identity of the cause of action; (3) identity of the parties; (4)
identity of the capacity of the parties. Additionally, res judicata
will bar subsequent claims that could have been litigated in the
prior action, but which actually were not[.]
72 A.3d at 689 (quotation marks and citations omitted). We have observed
that, “[t]he dominant inquiry” under these elements “is whether the
controlling issues have been decided in a prior action, in which the parties
had a full opportunity to assert their rights.” In re N.A., 116 A.3d 1144,
1148 (Pa. Super.), appeal denied, 117 A.3d 298 (Pa. 2015).
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Am. Nat'l Prop. & Cas. Co., ___ A.3d ___, 2017 WL 4803951, at * 3 (Pa.
Super., Oct. 25, 2017) (en banc).
In the EDPA action, Judge Shapiro declined to confirm the FINRA
arbitration award because Weinar did not seek confirmation until May 22,
2014, more than one year after the February 14, 2013 date of the award.
Noting that Section 9 of the FAA requires that a request for confirmation be
made “within one year after the award is made,” 9 U.S.C. § 9, she held that
Weinar’s request for confirmation was time-barred. Although Weinar asked
Judge Shapiro to confirm the award pursuant to Pennsylvania law, which
does not require a confirmation request to be made within one year, Judge
Shapiro held that she was required to apply the FAA’s one-year deadline in a
case brought under the FAA. Lex contends that Judge Shapiro’s statute of
limitations decision bars Weinar’s state-law confirmation request in the
Chester County court, but we disagree.
The preclusive effect of a federal judgment is a question of federal law.
Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507 (2001);
In re Stevenson, 40 A.3d 1212, 1223 (Pa. 2012). However, federal law
permits a state court to accord a judgment in a federal diversity case the
same preclusive effect as it would have if it were a judgment of a state court
in that state, unless the state preclusion rule would be incompatible with
federal interests. Semtek, 531 U.S. at 507-09. We have been made aware
of no incompatibility here.
Under both federal and Pennsylvania law, a central hallmark of the
preclusion doctrine is that a prior judgment may bar relitigation only of a
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claim that has been decided “on the merits.” Parklane Hosiery Co. v.
Shore, 439 U.S. 322, 326 n.5 (1979) (“[u]nder the doctrine of res judicata,
a judgment on the merits in a prior suit bars a second suit . . .”); Mariner
Chestnut Partners, L.P. v. Lenfest, 152 A.3d 265, 286 (Pa. Super. 2016)
(“[u]nder the doctrine of res judicata, or claim preclusion, a final judgment
on the merits by a court of competent jurisdiction will bar any future action
on the same cause of action . . .”) (quotation marks omitted). For res
judicata purposes, a judgment on the merits “is one that actually ‘pass[es]
directly on the substance of [a particular] claim’ before the court.” Semtek,
531 U.S. at 501-02 (interpolation in original; quoted citation omitted).11
This has been the law of Pennsylvania for more than a century. See
Weigley v. Coffman, 22 A. 919, 921 (Pa. 1891). Accordingly, we have
emphasized that res judicata “cannot be applied” to any judgment that does
not render a final substantive decision on a claim. See Consolidation Coal
Co. v. District 5, United Mine Workers, 485 A.2d 1118, 1122 (Pa. Super.
1984) (because preliminary injunction is a temporary remedy, it is not a
final judgment on the merits and cannot serve as a basis for res judicata).
The “substance” of Weinar’s confirmation claim in the EDPA action was
that he had obtained a favorable arbitration award that the court should
confirm so that he could then enforce it. Judge Shapiro did not rule on the
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11 The Court in Semtek contrasted this meaning of a judgment “on the
merits” with the broader meaning of the term in procedural rules such as
Rule 41(b) of the Federal Rules of Civil Procedure (dealing with involuntary
dismissals). 531 U.S. at 501-06. The procedural meaning of a judgment
“on the merits” is not relevant here.
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merits of that claim because she held that it was time-barred under the FAA.
A holding that a claim is time-barred is not a holding on the substantive
merits of the claim. As the U.S. Supreme Court explained in Semtek: “the
traditional rule is that expiration of the applicable statute of limitations
merely bars the remedy and does not extinguish the substantive right, so
that dismissal on that ground does not have claim-preclusive effect in other
jurisdictions with longer, unexpired limitations periods.” 531 U.S. at 504.
Although the parties have not cited to any Pennsylvania state appellate
decision addressing the res judicata effects of a dismissal based on the
statute of limitations, we note that Pennsylvania jurisprudence is in accord
with the view discussed in Semtek that a statute of limitations dismissal
only forecloses a remedy and does not substantively dispose of a claim.
See, e.g., Abrams v. Pneumo Abex Corp., 981 A.2d 198, 211 (Pa. 2009)
(“a statute of limitations merely bars a party’s right to a remedy”). 12 The
Court of Appeals for the Third Circuit, predicting Pennsylvania law, has held
that a judgment “based on a legal defense unrelated to the merits” — in that
case, governmental immunity — was not a judgment on the merits of the
claim and therefore did not bar subsequent relitigation in a forum where the
defense did not apply. Wade v. City of Pittsburgh, 765 F.2d 405, 410 (3d
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12 Accord, Goldstein v. Stadler, 208 A.2d 850, 852 n.1 (Pa. 1965) (“in
personal actions the statute of limitations constitutes only a procedural bar
to the remedy and not to the cause of action itself”); Priester v. Milleman,
55 A.2d 540, 542 (Pa. Super. 1947) (“[t]he general principle is that statutes
of limitations relating to personal actions merely bar the remedy and do not
discharge the right”).
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Cir. 1985). We conclude that a dismissal based on the statute of limitations
would be treated similarly in Pennsylvania and, because it is not a dismissal
on the merits, would not give rise to a res judicata bar.
In what bears a greater resemblance to a collateral estoppel argument
than to res judicata, Lex argues that Judge Shapiro’s unappealed application
of the FAA’s statute of limitations to foreclose Weinar’s confirmation claim in
federal court at least should mean that the statute of limitations also bars
Weinar’s confirmation claim in the Chester County trial court — in other
words, that the EDPA ruling is preclusive on the issue of whether the
confirmation claim is time-barred. We disagree. Judge Shapiro ruled only
on whether Weinar’s confirmation claim under the FAA was barred by the
FAA’s statute of limitations. Weinar’s Chester County petition did not seek
confirmation of the arbitration award under the FAA; rather, he sought
confirmation under Pennsylvania law, which (so long as it is not preempted
by the FAA) has a longer limitations period than that in the FAA. A
judgment that the FAA’s limitation period precludes recovery under the FAA
is not a judgment that a similar claim under Pennsylvania law is time-barred
under the applicable Pennsylvania limitations period. That was the point of
the Supreme Court’s statement in Semtek that a statute-of-limitations
dismissal “does not have claim-preclusive effect in other jurisdictions with
longer, unexpired limitations periods.” 531 U.S. at 504.
Lex responds that Weinar’s confirmation claim based on Pennsylvania
law is barred because Weinar asked Judge Shapiro to apply the Pennsylvania
limitations period in the EDPA action, Judge Shapiro applied the FAA’s one-
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year period instead, and Weinar did not appeal that decision. Again, we
disagree. Judge Shapiro did not apply the Pennsylvania limitations period to
Weinar’s claim in the EDPA action because she held that she was not
permitted to do so. Judge Shapiro construed federal law to mean that
because the case before her was brought in federal court under the FAA, she
was required to apply the FAA’s limitations period and could not instead
apply a different limitations period under state law. Lex, 2015 WL 1455810,
at *2. She therefore did not decide “the merits” of the Pennsylvania statute
of limitations issue, and her non-ruling on that issue does not present any
basis for precluding Weinar from seeking to apply the Pennsylvania statute
to his claim in Chester County.
In this respect, this case is similar to McArdle v. Tronetti, 627 A.2d
1219 (Pa. Super. 1993), appeal denied, 641 A.2d 587 (Pa. 1994). McArdle
sued Tronetti in federal court for federal civil rights violations and various
torts under Pennsylvania law in connection with Tronetti’s performance of
psychiatric services while McArdle was in prison. The federal court dismissed
the civil rights claims on immunity grounds and declined to exercise
jurisdiction over the tort claims. McArdle then sued again in state court,
asserting only the tort claims. Tronetti argued that the second case was
barred on res judicata grounds, but we disagreed. Relying on the Second
Restatement of Judgments, we observed:
A given claim may find support in theories or grounds
arising from both state and federal law. When the plaintiff
brings an action on the claim in a court, either state or
federal, in which there is no jurisdictional obstacle to his
advancing both theories or grounds, but he presents only
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one of them, and judgment is entered with respect to it,
he may not maintain a second action in which he tenders
the other theory or ground. If, however, the court in the
first action would clearly not have had jurisdiction to
entertain the omitted theory or ground (or, having
jurisdiction, would clearly have declined to exercise it as a
matter of discretion), then a second action in a competent
court presenting the omitted theory or ground should not
be held precluded.
Restatement (Second) of Judgments § 25, Comment e.
Although the comment specifically refers to theories not raised in
an initial action, we fail to discern any logical difference between
that factual scenario and a situation where the theory of relief
actually is raised and the court, despite possessing jurisdiction,
declines to exercise it as a matter of discretion.
627 A.2d at 1223. Here, unlike in McArdle, Judge Shapiro did not decline
to exercise jurisdiction over Weinar’s claim and statute-of-limitations
defense based on Pennsylvania law; rather, she held that because the case
was brought before her under the FAA, she could not apply Pennsylvania law
and instead had to apply the FAA. The results in the two cases were similar,
however: in both cases, the federal court decided the federal claim
presented under federal law and then did not decide the state-law claim. In
this situation, the teaching of the Second Restatement of Judgments applies
— that is, “a second action in a competent court presenting the omitted
theory or ground should not be held precluded.”
For these reasons, we agree with the trial court that res judicata did
not bar Weinar’s state law petition to confirm the arbitration award.
Preemption
(Lex’s Issues 1-4)
Lex argues that the trial court erred in confirming the arbitration
award under Pennsylvania law because the FAA’s one-year statute of
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limitations for confirming arbitration awards, 9 U.S.C. § 9, preempts the
Pennsylvania confirmation provision, 42 Pa. C.S. § 7342(b), which does not
set forth a limitations period.
Section 9 of the FAA states:
If the parties in their agreement have agreed that a judgment of
the court shall be entered upon the award made pursuant to the
arbitration, and shall specify the court, then at any time within
one year after the award is made any party to the
arbitration may apply to the court so specified for an
order confirming the award, and thereupon the court must
grant such an order unless the award is vacated, modified, or
corrected as prescribed in sections 10 and 11 of this title. If no
court is specified in the agreement of the parties, then such
application may be made to the United States court in and for
the district within which such award was made. . . .
9 U.S.C. § 9 (emphasis added).13 Section 7342(b) states:
On application of a party made more than 30 days after an
award is made by an arbitrator under section 7341 (relating
to common law arbitration), the court shall enter an order
confirming the award and shall enter a judgment or decree in
conformity with the order. . . .
42 Pa. C.S. § 7342(b) (emphasis added). In contrast to Section 9’s
statement that the application may be made “within one year after the
____________________________________________
13 Because Section 9 uses the words “may apply,” some courts have
interpreted it not to impose a mandatory time limit for FAA confirmation
proceedings. See William M. Howard, J.D., Ph.D., Annotation, Statute of
Limitations Under Federal Arbitration Act on Filing of Motion to Confirm
Award, 3 A.L.R. Fed. 2d 419 (2005) (discussing cases). The U.S. Supreme
Court has not decided this issue. Judge Shapiro held that the one-year limit
is mandatory in FAA actions, and we have no occasion to revisit that
question here. We therefore assume for purposes of this appeal, without
deciding, that Section 9 provides a mandatory one-year statute of limitations
if an action is brought under the FAA. The only question here is whether
that one-year provision preempts a longer limitations period (or the lack of
such a period) when an action for confirmation is brought outside of the FAA.
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award,” Section 7342(b) says only that the application must be made “more
than 30 days after an award”; it states no time after which the application
may not be filed.
Lex interprets Section 7342(b)’s silence regarding a limitations period
to mean that no statute of limitations applies to actions to confirm
arbitration awards.14 He argues that “the unlimited time period to confirm
an arbitration award provided by 42 Pa.C.S. § 7342 is in direct conflict with
the one-year statute of limitations provided by 9 U.S.C. § 9 of the FAA,” and
that “an unlimited time-period to confirm an arbitration award is directly at
odds with the FAA’s defined goal of promoting the expedient resolution of
disputes.” Lex’s Brief at 11. Lex contends that this conflict required the trial
____________________________________________
14 Weinar took a similar position in the trial court, but now contends that in
the absence of a contrary provision, the catch-all six-year statute of
limitations set forth at 42 Pa. C.S. § 5527(b) applies to confirmation
applications. See Weinar’s Brief at 9-10 n.3. Section 5527(b) provides:
Any civil action or proceeding which is neither subject to another
limitation specified in this subchapter nor excluded from the
application of a period of limitation by section 5531 (relating to
no limitation) must be commenced within six years.
Section 5531 does not exclude arbitration confirmations from the six-year
period. See 42 Pa. C.S. § 5531 (only types of civil actions not subject to a
limitations period are a client’s action against an attorney to enforce an
implied or resulting trust as to real property and an action by the
Commonwealth or specified other government bodies to recover against
property for the cost of maintenance and support of persons who were public
charges). We need not decide whether arbitration confirmations are subject
to a six-year limitations period because Weinar’s confirmation petition would
have been timely under either a six-year statute of limitations or, of course,
a scheme having no limitations period, and because application of a six-year
period would make no change to our preemption analysis.
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court to hold that application of Pennsylvania law to Weinar’s confirmation
claim is preempted by federal law. See id. at 9-11, 13-15.
The trial court concluded that the FAA did not preempt 42 Pa. C.S.
§ 7342(b) because (1) Section 7342(b) is a procedural rule that has no
effect on the enforcement of the arbitration agreement between the parties;
and (2) “there is no conflict between the Commonwealth’s laws regarding
the confirmation of arbitration awards and the goals and objectives of the
FAA.” Trial Ct. Op., 6/22/16, at 9-12.
Whether a state law is preempted by the FAA is a question of law.
Therefore, our standard of review is de novo and our scope of review is
plenary. See Moscatiello, 939 A.2d at 327.
The Supreme Court of Pennsylvania has provided the following
summary of the law of preemption:
Simply stated, federal law is paramount. More specifically,
Article VI, cl. 2, of the United States Constitution, the
Supremacy Clause, provides that the laws of the United States
“shall be the supreme Law of the Land; . . . any Thing in the
Constitution or Laws of any State to the Contrary
notwithstanding.” Thus, according to the United States Supreme
Court, laws that are in conflict with federal law are without
effect. Questions concerning the span of this constitutional
matter of preemption, however, are not always easily answered.
In determining the breadth of a federal statute’s preemptive
effect on state law, we are guided by the tenet that the purpose
of Congress is the ultimate touchstone in every pre-emption
case. Congress may demonstrate its intention in various ways.
It may do so through express language in the statute (express
preemption). Yet, even if a federal law contains an express
preemption clause, the inquiry continues as to the substance and
the scope of Congress’ displacement of the state law.
In the absence of express preemptive language, Congress’ intent
to preempt all state law in a particular area may be inferred.
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This is the case where the scheme of federal regulation is
sufficiently comprehensive to make reasonable the inference that
Congress left no room for supplementary state regulation. That
is to say, Congress intended federal law to occupy the entire
legislative field (field preemption), blocking state efforts to
regulate within that field.
Finally, even where Congress has not completely displaced state
regulation in a specific area, state law is nullified if there is a
conflict between state and federal law (conflict preemption).
Such a conflict may arise in two contexts. First, there may be
conflict preemption where compliance with state and federal law
is an impossibility. Furthermore, conflict preemption may also
be found when state law stands as an obstacle to the
accomplishment[] and execution of the full purposes and
objectives of Congress.
Additionally, concepts of federalism and state sovereignty make
clear that in discerning whether Congress intended to preempt
state law, there is a presumption against preemption.
Specifically, the United States Supreme Court has stated that it
will not be presumed that a federal statute was intended to
supersede the exercise of the power of the state unless there is
a clear manifestation of intention to do so. Stated another way,
a cornerstone of the United States Supreme Court’s preemption
jurisprudence is that, [i]n all pre-emption cases, and particularly
in those in which Congress has legislated . . . in a field which the
States have traditionally occupied, . . . we start with the
assumption that the historic police powers of the States were not
to be superseded by the Federal Act unless that was the clear
and manifest purpose of Congress.
Dooner v. DiDonato, 971 A.2d 1187, 1193-94 (Pa. 2009) (some quotation
marks and citations omitted).
The U.S. Supreme Court has held that “[t]he FAA contains no express
pre-emptive provision, nor does it reflect a congressional intent to occupy
the entire field of arbitration.” Volt, 489 U.S. at 477. Lex’s argument is
based on conflict preemption. Because Lex does not contend that it is
impossible to comply with both state and federal law, the issue before this
Court is whether Section 7342(b) “stands as an obstacle to the
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accomplishment[] and execution of the full purposes and objectives of
Congress.” Dooner, 971 A.2d at 1194.
“In determining the breadth of a federal statute’s preemptive effect on
state law, we are guided by the tenet that ‘the purpose of Congress is the
ultimate touchstone in every pre-emption case.’” Dooner, 971 A.2d at 1193
(quoting Wyeth v. Levine, 555 U.S. 555, 565 (2009)). The United States
Supreme Court has explained that “[t]he principal purpose of the FAA is to
ensure that private arbitration agreements are enforced according to their
terms.” Concepcion, 563 U.S. at 344 (internal quotation marks and
brackets omitted). Another purpose is “to promote the expeditious
resolution of claims.” Id. The Supreme Court has cautioned, however, that
—
We are . . . not persuaded by the argument that [where there is
a] conflict between these two goals of the Arbitration Act –
enforcement of private agreements and encouragement of
efficient and speedy dispute resolution – [that conflict] must be
resolved in favor of the latter in order to realize the intent of the
drafters.
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985).
Most recently, the Supreme Court of Pennsylvania reviewed the FAA’s
preemptive effect in Taylor v. Extendicare Health Facilities, Inc., 147
A.3d 490 (Pa. 2016), cert. denied, 137 S.Ct. 1375 (2017). At issue was
whether Rule 213(e) of the Pennsylvania Rules of Civil Procedure, which
requires the consolidation of survival and wrongful death actions for trial, is
preempted by the FAA when the survival action is subject to an arbitration
agreement. In answering that question affirmatively, the Court pointed out
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that Rule 213(a) promotes judicial efficiency by precluding duplicative
determinations of survival and wrongful death liability. 147 A.3d at 500,
510. After surveying recent U.S. Supreme Court interpretations of the FAA,
the Court determined that “the ‘overarching purpose’ of the FAA [is] twofold:
to ensure ‘the enforcement of arbitration agreements according to their
terms,’ and ‘to facilitate streamlined proceedings,’” id. at 505 (quoting
Concepcion, 563 U.S. at 344), and that “when these two purposes conflict,
. . . enforcement trumps efficiency.” 147 A.3d at 506. The fact that Rule
213(e) is merely “a procedural mechanism to control case flow, and does not
substantively target arbitration” would not make it immune from
preemption. Id. at 510.15 Thus, because Rule 213(e) prevented
enforcement of the agreement to arbitrate the survival action, it was
preempted. Id.
Neither the United States nor the Pennsylvania Supreme Court has
addressed whether the one-year statute of limitations in 9 U.S.C. § 9preempts state laws for confirmation of arbitration awards that have longer
statutes of limitations or no statute of limitations. Lex cites no decision
holding that the one-year provision preempts a longer state limitations
period, and our own research has uncovered no such decision. At least one
state supreme court has rejected Lex’s argument. In Thompson v. Lithia
____________________________________________
15To the extent that the trial court based its rejection of Lex’s preemption
argument on a distinction between procedural and substantive rules, we
agree with Lex that the distinction has less force in light of the decisions in
Concepcion and Taylor.
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ND Acquisition Corp. #1, 896 N.W.2d 230 (N.D. 2017), a North Dakota
court entered judgment on an arbitration award rendered under the North
Dakota arbitration statute. In contesting the judgment, the arbitration
respondent argued, among other things, that the order confirming the
arbitration award was entered more than one year after the award was
made and that the FAA’s one-year statute preempted North Dakota’s law on
confirmation, which contained no limitations period. The Supreme Court of
North Dakota disagreed, explaining:
Sections 9 through 11 of the FAA provide for expedited
judicial review to confirm, vacate, or modify arbitration awards.
Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 578 . . .
(2008). The FAA provides a shortcut to confirm, vacate, or
modify an award, but it is not the exclusive means to enforce an
award. Id. at 582-83 . . . . The Supreme Court said, “The FAA
is not the only way into court for parties wanting review of
arbitration awards: they may contemplate enforcement under
state statutory or common law, for example, where judicial
review of different scope is arguable.” Id. at 590 . . . .
[The North Dakota statute] requires the court to confirm the
award if it denies the motion to vacate and a motion to modify or
correct the award is not pending. A motion to modify or correct
the award was not pending. The district court was required to
confirm the award after it denied Thompson’s motion to vacate.
Section 9 of the FAA did not preclude confirmation of the award
under state statutory law. The court did not err in confirming the
award.
Thompson, 896 N.W.2d at 240.
The Supreme Court of Pennsylvania provided significant guidance on
how to resolve the issue before us when it addressed a question related to
this one in Moscatiello: whether Section 12 of the FAA, which requires that
a motion to vacate, modify, or correct an arbitration award be served on the
adverse party within three months of the filing or delivery of an arbitration
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award, preempts the portion of 42 Pa. C.S. § 7342(b) that requires that
such motions be filed within 30 days after the award is made. 16 The Court
held that there was no preemption. Moscatiello, 939 A.2d at 329.
In Moscatiello, the arbitration was conducted pursuant to rules of the
National Association of Securities Dealers, a predecessor to FINRA, and was
subject to the FAA. The Moscatiellos argued that they had “contracted to
arbitrate their claims under the FAA” and therefore “should be permitted to
rely on the entire FAA in asserting their post-arbitration rights,” including its
three-month time limit for challenging an award. 939 A.2d at 327-28. They
contended that Pennsylvania’s 30-day limit “provides less protection” than
the FAA’s three months and therefore should be preempted. Id. at 328. In
rejecting that argument, the Supreme Court stated: “Because Pennsylvania’s
arbitration acts provide for the enforcement of arbitration of contract and
other disputes, they foster the federal policy favoring arbitration
enforcement. The 30-day time limit found in both Pennsylvania arbitration
acts does not undermine this policy or the FAA’s goal.” Id. at 329. The
Court continued:
The federal policy favoring arbitration, set forth in the FAA,
is limited to Congress’s intent to make arbitration agreements
enforceable. The FAA does not preempt the procedural rules
governing arbitration in state courts, as that is beyond its reach.
Thus, we hold there is no preemption.
____________________________________________
16 Section 7342(b) does not explicitly state that the deadline for seeking to
vacate or modify an award is 30 days, but its provision permitting
confirmation to occur after 30 days has been interpreted to mean that there
is a 30-day time limit for challenging the award. See Beriker v.
Permagrain Prods., Inc., 500 A.2d 178, 179 (Pa. Super. 1985).
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Id. Moscatiello points toward the correct resolution of this case.
As the U.S. Supreme Court stated in Hall Street, “[t]he FAA is not the
only way into court for parties wanting review of arbitration awards: they
may contemplate enforcement under state statutory or common law, for
example.” 552 U.S. at 590. The Court recognized that state laws provide
different procedures and rights than does the FAA — expanded judicial
review of the arbitration award, for example. See id. Nevertheless, the FAA
does not preempt their use. Nothing in the FAA requires federal and state
arbitration rules and procedures to be identical. Thus, as one federal court
has summarized: “Since § 9 was meant to supplement and not preclude
other remedies, confirmation under § 9 is not mandatory and as such a
party is not prevented from using either state law or common law
procedures to confirm the award.” In re Consolidated Rail Corp., 867 F.
Supp. 25, 32 (D.D.C. 1994); see also Photopaint Techs., LLC v.
Smartlens Corp., 335 F.3d 152, 159 (2d Cir. 2003) (noting that “an action
at law offers an alternative remedy [to § 9] to enforce an arbitral award”);
Sverdrup Corp. v. WHC Constructors, Inc., 989 F.2d 148, 155 (4th Cir.
1993) (same); Kentucky River Mills v. Jackson, 206 F.2d 111, 120 (6th
Cir.) (holding Section 9 of the FAA does not preclude a prevailing party from
seeking enforcement of an arbitration award in an action at law), cert.
denied, 346 U.S. 887 (1953); FIA Card Servs., N.A. v. Gachiengu, 571
F. Supp. 2d 799, 805 (S.D. Tex. 2008) (“the FAA does not preempt state
common-law actions to confirm arbitration awards”).
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As the Pennsylvania Supreme Court held in Moscatiello, Section
7342(b), along with Pennsylvania’s other arbitration laws, “provide for the
enforcement of arbitration of contract and other disputes” and thereby
“foster the federal policy favoring arbitration enforcement.” 939 A.2d at
329. The Pennsylvania statute therefore does not conflict with the FAA’s
“overarching purpose” of “ensur[ing] ‘the enforcement of arbitration
agreements according to their terms.’” See Taylor, 147 A.3d at 505
(quoted citation omitted).17
Lex insists that the longer limitation period conflicts with the FAA’s
other purpose of “promot[ing] the expeditious resolution of claims,” see
Concepcion, 563 U.S. at 345, but this argument distorts the FAA’s focus on
efficiency. The Court in Concepcion “defined the ‘fundamental attributes of
arbitration’ as ‘lower costs, greater efficiency and speed, and the ability to
choose expert adjudicators to resolve specialized disputes.’” Taylor, 147
A.3d at 505 (quoting Concepcion, 563 U.S. at 348). Efficiency thus is
____________________________________________
17 Lex’s argument that Concepcion, Taylor, and other recent decisions
have rendered older decisions such as Moscatiello less authoritative on the
preemption issue is incorrect. Those decisions are both persuasive and
binding here. We agree with the trial court that the other federal cases upon
which Lex relies are distinguishable from this one. Most of them deal with
enforcement of arbitration agreements, not post-arbitration enforcement of
an award. See Trial Ct. Op., 6/22/16, at 5-8 (distinguishing Preston v.
Ferrer, 552 U.S. 346 (2008); Quilloin v. Tenet HealthSystem
Philadelphia, Inc., 673 F.3d 221 (3d Cir. 2012); and Litman v. Cellco
P’ship, 655 F.3d 225 (3d Cir. 2011), cert. denied, 565 U.S. 1115 (2012)).
Renard v. Ameriprise Fin. Servs., Inc., 778 F.3d 563, 566 (7th Cir.
2015), is inapposite because the parties’ agreement in that case stated that
the arbitration clause was “governed by and enforceable under the terms of
the Federal Arbitration Act,” and Lex does not contend that his agreement
with Weinar contained similar language. See Trial Ct. Op., 6/22/16, at 9.
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viewed as one of the salutary characteristics of arbitration that the FAA is
designed to foster. But that does not mean that any state procedural
mechanism that makes an arbitration longer than it would be under the
comparable FAA procedure is preempted and invalid. Nothing in the FAA
says that an arbitration must be conducted or an arbitration award must be
confirmed in the fastest way possible.
The preemption question under the FAA is whether a state law impairs
the efficiency that an arbitration system provides. The Pennsylvania statute
does not do that. Section 7342(b) enables a successful party to an
arbitration to obtain confirmation of an award 30 days after the award is
made and at any time thereafter. It provides that confirmation may be
obtained only upon “application of a party,” and states that “the court shall
enter an order confirming the award” upon receiving such an application —
thus providing a procedure that is streamlined, swift, and efficient. Applying
“state rules governing the conduct of arbitration — rules which are
manifestly designed to encourage resort to the arbitral process — simply
does not offend the rule of liberal construction [in favor of arbitration], nor
does it offend any other policy embodied in the FAA.” Volt, 489 U.S. at 476.
In fact, by affording successful arbitration parties additional time to
confirm an award, the Pennsylvania statute both fosters arbitration and
enhances the efficiency of the arbitration process by reducing or
ameliorating an obstacle to an award’s successful enforcement. If
confirmation were barred by a short statute of limitations, an injured party
might be forced to resort to other means of redress for his injury, probably
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by duplicating his successful arbitration with litigation to recover on the
same claim. A federal court of appeals made this point in Derwin v. Gen.
Dynamics Corp., 719 F.2d 484 (1st Cir. 1983), when it rejected an effort to
have the one-year FAA limitations period apply in place of an unlimited
Massachusetts limitations period in an action to confirm an arbitration award
under the federal Labor Management Relations Act. The court explained that
if the shorter FAA statute applied and “[i]f the prevailing party failed to
obtain a confirmatory decree within the limitations period, . . . [that party
would be forced] to undergo the expense and delay of suing to confirm the
award, even where the other party had agreed in good faith that the award
was final and binding.” 719 F.2d at 489-90. A shorter statute thus may
promote, rather than reduce, inefficiencies. In fact, that is precisely what
has happened in this case: because of his difficulties confirming the
arbitration award, Weinar has filed a complaint in Chester County to recover
damages that overlap with those he was awarded by the arbitrators. That
result is highly inefficient.
Seen in this context, much of Lex’s argument about inefficiencies is
disingenuous. Rule 12904(j) of the FINRA Code of Arbitration Procedure
provides that “[a]ll monetary awards shall be paid within 30 days of receipt
unless a motion to vacate has been filed with a court of competent
jurisdiction.” After Judge Shapiro considered Lex’s motion to vacate and
modified the award in the EDPA action, Lex could have paid the modified
award pursuant to Rule 12904(j). Instead, Lex has refused to pay the
award, even though it was determined through an arbitration procedure to
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which he agreed and after he fully availed himself of proceedings in the
EDPA action to contest it. It is that refusal by Lex that has impaired the
efficiency of the arbitration process in this case — not the fact that
Pennsylvania’s statute of limitations is longer than that in the FAA.18
For all of these reasons, we agree with the trial court that the one-year
time limit for confirming arbitration awards set forth in Section 9 of the FAA
does not preempt 42 Pa. C.S. § 7342(b). The trial court’s confirmation of
the award therefore was proper.
NO. 1615 EDA 2016
(WEINAR’S APPEAL FROM THE DISMISSAL OF HIS STATE LAW CLAIMS)
In his cross-appeal, Weinar raises the following issues:
1. Did the trial court abuse its discretion and commit an error of
law in dismissing with prejudice Dr. Weinar’s breach of contract
and alternative quasi-contract and tort claims . . . on the basis
[that] they had already been decided in an underlying arbitration
and did not constitute a separate cause of action?
2. Did the trial court abuse its discretion and commit an error of
law in dismissing with prejudice Dr. Weinar’s contract and
alternative quasi-contract and tort claims upon preliminary
objections of Mr. Lex while Dr. Weinar’s preliminary objections to
Mr. Lex’s preliminary objections were still pending?
Weinar’s Brief in Opp. to Lex’s Appeal and in Support of Cross Appeal at
33.19
____________________________________________
18 We note that Weinar sought confirmation of the arbitration award on the
same day the award was made, by reasonably filing an application to
confirm in a court in New York, the state where McGinn Smith did business
and the state whose law governed under the arbitration contract’s choice-of-
law clause. This is not a case where Weinar slept on his rights.
19In his appeal, Weinar does not challenge the dismissal of his Counts IV
(Confirmation of Award) and V (Declaratory Judgment).
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We consider Weinar’s appeal under the following standard:
Our standard of review of an order of the trial court overruling or
granting preliminary objections is to determine whether the trial
court committed an error of law. When considering the
appropriateness of a ruling on preliminary objections, the
appellate court must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer test the legal
sufficiency of the complaint. When considering preliminary
objections, all material facts set forth in the challenged pleadings
are admitted as true, as well as all inferences reasonably
deducible therefrom. Preliminary objections which seek the
dismissal of a cause of action should be sustained only in cases
in which it is clear and free from doubt that the pleader will be
unable to prove facts legally sufficient to establish the right to
relief. If any doubt exists as to whether a demurrer should be
sustained, it should be resolved in favor of overruling the
preliminary objections.
Khawaja v. RE/MAX Cent., 151 A.3d 626, 630 (Pa. Super. 2016) (citation
omitted). Applying this standard, we conclude that the trial court abused its
discretion in granting Lex’s preliminary objections to Weinar’s second
amended complaint, and we vacate that portion of the trial court’s order.
When Lex filed preliminary objections seeking to dismiss Weinar’s
second amended complaint, Weinar responded with preliminary objections to
Lex’s filing. But the trial court ignored Weinar’s preliminary objections and
instead dismissed Weinar’s case on the basis of the preliminary objections
filed by Lex. We agree with the trial court’s later recognition that this was
error. See Trial Ct. Op., 7/13/16, at 10. The Pennsylvania Rules of Civil
Procedure provide, “The court shall determine promptly all preliminary
objections,” Pa.R.Civ.P. 1028(c)(2) (emphasis added), and we have held
that “[t]he presence of preliminary objections which have not been disposed
of is a fatal defect . . . .” Advance Bldg. Servs. Co. v. F & M Schaefer
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Brewing Co., 384 A.2d 931, 932 (Pa. Super. 1977) (affirming the striking
of a default judgment where a fatal defect of unresolved preliminary
objections was apparent on the face of the record). Pennsylvania’s
procedural rules required the court to address Weinar’s preliminary
objections before ruling on the preliminary objections filed by Lex.
The trial court concluded that its procedural error was harmless
because ultimately, on the merits, Lex was entitled to have his preliminary
objections sustained and to have Weinar’s complaint dismissed. Trial Ct.
Op., 7/13/16, at 10. We disagree. Preliminary objections should be
sustained only when “it is clear and free from doubt that the pleader will be
unable to prove facts legally sufficient to establish the right to relief.”
Khawaja, 151 A.3d at 630. An examination of the trial court’s grounds for
dismissal shows that there is no such clarity here.
First, the trial court held that Weinar’s claims could not proceed
because they were barred by res judicata and collateral estoppel as a result
of the arbitration. Trial Ct. Op., 7/13/16, at 7-8. But res judicata and
collateral estoppel are affirmative defenses that must be raised in New
Matter, not in preliminary objections, Pa.R.Civ.P. 1030(a), unless the
complaint “sets forth in detail, either directly or by reference, the facts and
issues pleaded by the prior suit.” Kiely v. J. A. Cunningham Equip., Inc.,
128 A.2d 759, 760 (Pa. 1957). While Weinar’s second amended complaint
described the underlying arbitration, it did not do so in a manner that made
it “clear and free from doubt” that the arbitration award barred Weinar’s
claims. Rather, it suggested that the claims are not barred.
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Weinar’s breach of contract claim alleges that Lex was contractually
obligated “to abide by and perform any [arbitration] award(s)” and “has
refused to perform any portion of the Arbitration Award” made in this case.
Second Amended Compl. ¶¶ 23-24. His conversion claim asserts that after
the award was made, Lex wrongfully retained the money that should have
been used to satisfy the award and thereby “deprived Weinar of a right of
property” in that money.” Id. ¶ 29. His unjust enrichment claim avers that
by failing to pay the award, Lex is wrongfully retaining benefits of “the now
worthless Notes” that his company sold to Weinar and is being unjustly
enriched as a result. Id. ¶¶ 33-34. All of those allegations relate to Lex’s
refusal to pay the arbitration award after the arbitration was completed.
Because the claims are based on events that occurred after the arbitration, it
is difficult to see how the claims could be precluded by the award, which, of
course, was based on misconduct that occurred before the award was made.
The trial court also sustained Lex’s preliminary objection to Weinar’s
conversion claim on the basis of the “gist of the action” doctrine, reasoning
that the conversion claim arose “solely out of Lex’s failure to pay the
arbitration award, an obligation which was created by contract.” Trial Ct.
Op., 7/13/16, at 9. The gist-of-the-action doctrine bars a tort action “when
the gist or gravamen of the cause of action stated in the complaint, although
sounding in tort, is, in actuality, a claim against the party for breach of its
contractual obligations.” Bruno v. Erie Ins. Co., 106 A.3d 48, 53 (Pa.
2014) (footnotes omitted). But we have cautioned against prematurely
dismissing a tort action on the basis of this doctrine, because our rules
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permit the pleading of tort and contract claims in the alternative. See
Telwell, Inc. v. Grandbridge Real Estate Capital, LLC, 143 A.3d 421,
429 (Pa. Super. 2016) (citing Pa.R.Civ.P. 1020(c)). Although Weinar has
alleged that Lex breached a contractual obligation to pay the arbitration
award, Lex has pointed out that Weinar has not identified the specific
contract or its terms. See Lex’s Prelim. Objs. at ¶ 42. At this stage of the
proceedings, it is not clear and free from doubt whether the gist of Weinar’s
action sounds in contract or tort. See Telwell, 143 A.3d at 429. The
court’s dismissal on gist-of-the-action grounds therefore was premature.
The trial court also opined that Weinar’s entire second amended
complaint was “merely another effort to confirm the arbitration award,
superficially disguised as common law claims.” Trial Ct. Op., 7/13/16, at 10.
The court therefore concluded that the complaint should be dismissed as an
effort to obtain a duplicative recovery. See Foflygen v. R. Zemel, M.D.
(PC), 615 A.2d 1345, 1350 (Pa. Super. 1992) (precluding duplicative
recovery on alternate theories), appeal denied, 629 A.2d 1380 (Pa. 1993).
But if, as Weinar contends, his cause of action is for events that occurred
after the arbitration, the misconduct (and, therefore, the potential recovery)
would not necessarily be duplicative of that in the arbitration. See id. (while
“alternative theories of recovery are different means for obtaining the same
relief for the same harm caused by the same party, . . . separate causes of
action request different relief for different harm”). There appears to be
considerable overlap between the damages Weinar was awarded in the
arbitration and those he seeks to recover under his second amended
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complaint. See Second Am. Compl. at 5, 6, 8 (seeking compensatory
damages of $270,000, interest, and fees of $7,862.50). But it is premature
to hold, as a matter of law, that Weinar cannot recover any additional
damages based on Lex’s post-arbitration conduct. That question will require
further factual development, particularly in light of the fact that, under this
decision, Weinar now can have the arbitration award enforced and thereby
remove the arbitration damages from what he seeks to recover under his
complaint.
For all of these reasons, it was not “clear and free from doubt” that
Lex was entitled to dismissal of Weinar’s second amended complaint, and we
therefore vacate the trial court’s order sustaining Lex’s objections and
dismissing the complaint. If it ultimately becomes clear that Weinar’s claims
are no more than alternative assertions of the claims he won in the
arbitration, or that, even if the claims are somewhat different, there are no
more damages that Weinar may recover, the defenses based on claim
preclusion or the rule against duplicative recovery under Foflygen may
apply. But the trial court acted prematurely in making those determinations
on the basis of Lex’s preliminary objections to Weinar’s pleading.
On remand, the trial court should consider Weinar’s preliminary
objections to Lex’s objections. If those objections are overruled, it should
afford Weinar an opportunity either to answer Lex’s objections or to amend
his complaint pursuant to Civil Rule 1028(c)(1).
In summary, we affirm the portion of the trial court’s order confirming
the arbitration award under Pennsylvania law, we vacate the portion of the
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trial court’s order sustaining Lex’s preliminary objections to Weinar’s second
amended complaint, and we remand this case for further proceedings,
including consideration of Weinar’s preliminary objections. Jurisdiction is
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/15/17
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