Altoona Regional v. Schutt, C. v. University , 2014 Pa. Super. 191 ( 2014 )

J-A08034-14
2014 Pa. Super. 191
ALTOONA REGIONAL HEALTH SYSTEM IN THE SUPERIOR COURT OF
PENNSYLVANIA
v.
COREY R. SCHUTT, D.O.
Appellees
v.
UNIVERSITY ORTHOPEDICS CENTER,
LTD.
Appellant No. 1072 WDA 2013
Appeal from the Order Entered on May 30, 2013
In the Court of Common Pleas of Blair County
Civil Division at No.: Civil Action No. 2012 GN 621
BEFORE: ALLEN, J., OLSON, J., and WECHT, J.
OPINION BY WECHT, J.: FILED SEPTEMBER 04, 2014
2013 order of the Court of Common Pleas of Blair County. UOC alleges that
the trial court erred when it granted partial judgment on the pleadings and a
injunction prevented UOC from enforcing a restrictive covenant provision in
Corey R. Schutt, D
Schutt from practicing orthopedics or related subspecialties for two years
facilities. UOC also asserts that the trial court erred in sustaining the
preliminary objections filed by Dr. Schutt. For the reasons that follow, and
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upon review of Rules 1034 and 2227 of our Rules of Civil Procedure, we
must vacate in part, reverse in part, and remand for further proceedings.
On October 27, 2009, UOC and Dr. Schutt entered into a three-year
employment agreement. See Complaint for Injunction and Declaratory
Support and
Relief, 2/22/2012, Exh. A.1
Approximately two years later, Dr. Schutt terminated his employment
-owned subsidiary of ARHS. In a January
11, 2012 letter to Dr. Schutt, UOC asserted that Dr. Schutt had breached
the restrictive covenant of the Employment Agreement by beginning work at
Elite Orthopedics, and UOC claimed it was entitled to $250,000 in liquidated
damages as a result of the alleged breach. ARHS responded with a January
25, 2012 letter that demanded UOC cease any attempts to enforce the
restrictive covenant. Specifically, ARHS cited an exception to the restrictive
covenant in Section 5.8 of the Recruitment Agreement.
On February 22, 2012, ARHS filed a complaint against UOC in the
Court of Common Pleas of Blair County. The complaint sought an injunction
to prevent UOC from enforcing the restrictive covenant against Dr. Schutt,
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ights under the
complaint. In relevant part, UOC sought dismissal of the complaint because
ARHS had failed to join Dr. Schutt, an assertedly indispensable party. See
ry Objection to Complaint, 3/14/2012, at 5-6. In an order
and opinion dated August 1, 2012, the learned trial court concluded that Dr.
Schutt was an indispensable party pursuant to Pa.R.C.P. 2227(a):
Persons having only a joint interest in the subject matter of an
action must be joined on the same side as plaintiffs or
defendants. Pa.R.C.P. 2227[(a)]. Pennsylvania law holds that a
with the claims of the litigants that no decree can be made
w Sprague v. Casey, 550 A.2d
184, 189 (Pa. 1988). In this case, the [c]omplaint relates to the
enforcement of agreements to which Dr. Schutt is [a] party and
the disposition of this [c]omplaint will either render him able to
practice medicine freely or may lead to further litigation
involving his ability to practice and obligations to pay damages
have jurisdiction to render a judgment without the presence of
Dr. Schutt because of the principle that a decree should finally
determine the rights that all persons have in a subject. Powell
v. Shepard, 113 A.2d 261, 265 (Pa. 1955). Therefore, it is
] rights are so connected that no
decree can be made without impairing those rights.
Order, 8/1/2012, at 3-4 (citations modified, italics added). Consequently,
within which to amend its pleading.
On August 7, 2012, ARHS filed an amended complaint. This pleading
was virtually identical to the original complaint and requested the same
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injunctive and declaratory relief. The only substantive difference between
the two filings was that,
complaint added Dr. Schutt as a named party. See
Complaint, 8/7/2012, ¶¶27-35. ARHS chose to designate Dr. Schutt as an
On September 21, 2012, UOC respon
with an answer, new matter, and counterclaims. In this filing, UOC asserted
various counterclaims against ARHS and Dr. Schutt, including breach of
contract, tortious interference, and breach of fiduciary duty. The
counterclaims also sought to enforce the restrictive covenant against Dr.
Schutt, and requested that ARHS provide UOC allegedly unpaid income
contributions. See Answer, New Matter and Counterclaims to First Amended
Complaint for Injunction and Declaratory Relief, 9/21/2012, at 22-32.
counterclaims. In pertinent part, Dr. Schutt asserted a demurrer on all
counterclaims, arguing that Pa.R.C.P. 2227(b) barred UOC from filing
affirmative counterclaims against Dr. Schutt because of his involuntary
Counterclaims, 10/10/2012, ¶¶10-16. On October 18, 2012, ARHS filed a
On December 13, 2012, UOC filed a
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preliminary objections, ARHS filed a motion for partial judgment on the
the Employment Agreement. See Motion for Partial Judgment on the
Pleadings, 1/2/13, ¶2. ARHS argued that the language in Section 5.8 of the
Recruitment Agreement unequivocally forbids UOC from attempting to
enforce the restrictive covenant in the event that Dr. Schutt commences
employment with an ARHS subsidiary. Id. at ¶18.
motion was premature because the pleadings were not closed and because
material facts remained in dispute. On June 5, 2013, the trial court issued
for injunctive and declaratory
relief:
Section 5.8 of the Recruitment Agreement . . . is a carve-out
provision which specifically prevents UOC from undertaking any
efforts to restrict, prohibit or otherwise penalize Dr. Schutt from
providing services as an employee of or contractor of any entity
which is owned or controlled by ARHS or any of its subsidiaries
or its affiliates. Section 5.8 concludes with [sic] its last sentence
by entitling ARHS to injunctive relief if UOC either directly
violates[,] or is likely to violate[,] the subsection.
Section 5.8 is applicable to the current relationship and the
[c]ourt agrees with ARHS that the relief which [ARHS] requests
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is abundantly clear as contained within the four corners of
[S]ection 5.8. The [Recruitment] Agreement also contains a
statement that includes a standard paragraph precluding
consideration of any other interpretation of the document not
reduced to writing.
-8.
Next, the tr
affirmative counterclaims:
Dr. Schutt relies on Pa.R.C.P. 2227(b) as it relates to involuntary
plaintiffs. Dr. Schutt further relies on Karoly v. Cap, 530 A.2d
436 (Pa. 1987), to buttress his argument that Pa.R.C.P. 2227
joined as involuntary [p]laintiffs. Dr. Schutt reasons that if
[i]nvoluntary [plaintiffs] are not required to file pleadings, [then]
affirmative counterclaims seeking injunctive relief and money
damages should not be permitted.
The [c]ourt agrees with Dr. Schutt and therefore grants this
demur[r]er and dismisses all [c]ounterclaims brought against Dr.
Schutt in his role of [i]nvoluntary [p]laintiff.
By this specific portion of the [o]rder, the [c]ourt is granting the
demur[r]er as it involves Dr. Schutt being an [i]nvoluntary
[p]laintiff. The reliance upon which [sic] this [c]ourt is granting
the dem
[i]nvoluntary [p]laintiff.
Id. at 10-11 (citations modified or omitted). The trial court further stated
the [c]ourt that its earlier [o]rder allowing Dr. Schutt to be entered as an
Id. at 11.
On June 26, 2013, UOC filed a notice of appeal. On July 2, 2013, the
trial court ordered UOC to file a concise statement of errors complained of on
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appeal pursuant to Pa.R.A.P. 1925(b). On July 19, 2013, UOC timely filed its
Rule 1925(b) statement. On September 26, 2013, in lieu of an opinion, the
in the above[-]caption
UOC presents the following issues for our review:
A. Whether the trial court erred by ruling that an indispensable
party joined as a[n] involuntary plaintiff was not subject to
related counterclaims?
B. Whether the trial court erred by granting t
for partial judgment on the pleadings, and by dismissing the
not complete, and where the pleadings of record disclosed the
existence of material disputed facts?
C. Whether the trial court erred by granting a permanent
injunction that prevented the defendant from asserting tort
and contract claims, where the right to recovery was not clear
on the face of the pleadings alone?
Brief for UOC at 3.
Before addressing the merits of the issues presented by UOC, we must
clarify the appealability of the underlying order. Inasmuch as the issue of
appealability affects our jurisdiction, we may raise it sua sponte. Morgan
Trailer Mfg. Co. v. Hydraroll, Ltd., 804 A.2d 26, 29 30 (Pa. Super. 2002).
As a general rule, this Court has jurisdiction only over appeals taken from
final orders. Commonwealth v. Scarborough, 64 A.3d 602, 608 (Pa.
See Pa.R.A.P.
341(b). Here, the trial cou
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judgment on the pleadings. T.C.O. at 12-13. Thus, at first blush, it would
appear that we lack jurisdiction.
However, Pa.R.A.P. 311 carves out an exception to this general rule.
Specifically, an appeal may be taken as of right from an order that grants or
denies an injunction. Pa.R.A.P. 311(a)(4). The instant order granted ARHS
an injunction against UOC. Furthermore, the portion of the order sustaining
quest for injunctive relief
listed in its fourth counterclaim. Because the underlying order granted and
denied injunctions, our jurisdiction is proper. See Vonada v. Long, 852
A.2d 331, 335-
contained in Rule 311(a)(4) is that an order refusing [or granting] a request
for an injunction is an interlocutory order appealable as of right unless the
order involves an injunction issued pursuant to two explicit provisions of the
Divorce Code or the order is in the form of a decree nisi
Due to the nature of our disposition, we will begin our discussion by
Specifically, UOC alleges that judgment on the pleadings was premature
because those pleadings were still open. We agree.
Our scope and standard of review in this context are well-defined:
Our scope of review on an appeal from the grant of judgment on
the pleadings is plenary. Meehan v. Archdiocese of Phila.,
870 A.2d 912, 918 (Pa. Super. 2005). Entry of judgment on the
pleadings is permitted under Pennsylvania Rule of Civil
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closed, but within such time as not to unreasonably delay trial,
1034(a). A motion for judgment on the pleadings is similar to a
demurrer. Citicorp N. Am., Inc. v. Thornton, 707 A.2d 536,
538 (Pa. Super. 1998). It may be entered when there are no
disputed issues of fact and the moving party is entitled to
judgment as a matter of law. Id. In determining if there is a
dispute as to facts, the court must confine its consideration to
the pleadings and relevant documents. Id. On appeal, we
accept as true all well-pleaded allegations in the complaint.
Meehan, supra.
ruling was based on a clear error of law or whether there were
facts disclosed by the pleadings which should properly be tried
before a jury or by a judge sitting without a jury. Citicorp,
supra.
Neither party can be deemed to have admitted either
conclusions of law or unjustified inferences. Moreover, in
conducting its inquiry, the court should confine itself to the
pleadings themselves and any documents or exhibits
properly attached to them. It may not consider
inadmissible evidence in determining a motion for
case is clear and free from doubt such that a trial would
prove fruitless will an appellate court affirm a motion for
judgment on the pleadings.
, 606 A.2d 470, 471-72 (Pa. Super.
1992) (quotations and citations omitted).
Consolidation Coal Co. v. White, 875 A.2d 318, 325-26 (Pa. Super. 2005)
(citations modified).
UOC alleges that the motion for judgment on the pleadings was
premature because Pa.R.C.P. 1034 requires that the relevant pleadings be
closed before any party may file such a motion. Specifically, UOC maintains
that, at the time when ARHS interposed its motion, the relevant pleadings
were not closed because Dr. Schutt had yet to file a substantive response to
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for UOC at 23-24.
Motions for judgment on the pleadings are governed by Pa.R.C.P.
1034, which reads as follows:
Rule 1034. Motion for Judgment on the Pleadings
(a) After the relevant pleadings are closed, but within such
time as not to unreasonably delay the trial, any party may
move for judgment on the pleadings.
(b) The court shall enter such judgment or order as shall be
proper on the pleadings.
The relevant scope of pleadings is governed by Pa.R.C.P. 1017:
Rule 1017. Pleadings Allowed
(a) Except as provided by Rule 1041.1,[1] the pleadings in an
action are limited to
(1) a complaint and an answer thereto,
(2) a reply if the answer contains new matter, a
counterclaim or a cross-claim,
(3) a counter-reply if the reply to a counterclaim or
cross-claim contains new matter,
(4) a preliminary objection and a response thereto.
have considered the ARHS [motion for partial judgment on the pleadings]
ounterclaims, and
____________________________________________
1
Pa.R.C.P. 1041.1 applies only to asbestos litigation.
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whether the relevant pleadings were, in fact, closed when ARHS filed its
motion for judgment on the pleadings.
With specific reference to the interplay between the close of pleadings
and preliminary objections, this Court has stated the following:
Preliminary objections are a form of pleading allowable in
equity. . . . Pa.R.C.P. 1028 is the logical extension of Rule 1017
and provides for the substantive requirements and handling of
considered ripe for consideration of its merits, either by trial or
other hearing, the pleadings must be closed. Implicit in this
holding is the requirement that all preliminary objections a part
of the pleadings be disposed of by the trial court.
Reddick v. Puntureri, 363 A.2d 1198, 1200 (Pa. Super. 1976).2 Instantly,
the record confirms that Dr. Schutt filed his preliminary objections on
October 10, 2012. Between the time that Dr. Schutt filed his preliminary
objections and the time that ARHS filed its motion for partial judgment on
the pleadings on January 2, 2013, the trial court took no action regarding
3
Based on this record, it is evident that
____________________________________________
2
See also Republic Servs. of Penna., LLC v. Krone, 2389 C.D.
court is first required to rule on the [preliminary objections] before
considering the merits, and the failure to do so is a fatal procedural defect
3
objections until it issued its June 5, 2013 opinion.
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motion for partial judgment on the pleadings. Our precedent leads us to
conclude that the pendency of unresolved preliminary objections means that
the pleadings have not yet closed. Reddick, supra. Consequently, we
motion for partial judgment on the pleadings was procedurally proper.4,5
See
Based upon the foregoing discussion, we hold that the trial court erred
____________________________________________
4
parties to the motion for judgment on the pleadings must be closed prior to
partial judgment on the pleadings was only between ARHS and UOC, and
See Brief for ARHS at 8.
However, this argument is undone by the facts that (1) Dr. Schutt had been
itigation; and (2)
Agreement.
5
This Court has held that, to avoid waiver, a respondent must make a
timely objection to improper pleadings. See Vintage Homes, Inc. v.
Levin, 554 A.2d 989, 992 (Pa. Super. 1989) (holding that an appellant
-
presenting the merits of the
motion for partial judgment. See
Partial Judgment on the Pleadings, 1/22/2013, at 6-
[p]reliminary [o]bjections have been resolved, and until the parties have an
opportunity to conduct discovery related to the claims and disputed factual
allegations framed by the pleadings, the [m]otion is not ripe for decision,
and should be denied as prem
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before disposing of the preliminary objections in this case. Because the
Rule 1034(a). Thus
third claim on this appeal,
appeal). In relevant part, UOC argues that, as a party defendant, it should
be able to assert counterclaims against Dr. Schutt. The litigants have
plaintiffs are not subject to affirmative counterclaims by party defendants.
Before addressing this question, however, we must assess whether Dr.
sition was based upon Sprague v. Casey, 550 A.2d 184,
189 (Pa. 1988), and the rules governing indispensable parties pursuant to
subsection 2227(a). See Order, 8/1/2012, at 3-
without impairing
Sprague clearly states that a party must be joined if
subsequent opinion, the trial court stated that its order authorized ARHS to
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join Dr. Schutt as an involuntary plaintiff pursuant to subsection 2227(b).
See T.C.O. at 11.6
In relevant part, Pa.R.C.P. 2227 reads as follows:
Rule 2227. Compulsory Joinder
(a) Persons having only a joint interest in the subject matter
of an action must be joined on the same side as plaintiffs
or defendants.
(b) If a person who must be joined as a plaintiff refuses to
join, he or she shall, in a proper case, be made a
defendant or an involuntary plaintiff when the substantive
law permits such involuntary joinder.
Kelly v. Carborundum Co., 453 A.2d 624, 628 (Pa.
Super. 1982). The text of the rule itself draws a distinction between
compulsory joinder pursuant to subsection 2227(a) and involuntary joinder
____________________________________________
6
to participate in this action. See
not join with ARHS in the litigation filed by ARHS. Dr. Schutt did not want to
be a part
1, 2012 order did not explicitly direct ARHS to join Dr. Schutt as an
involuntary plaintiff in the instant lawsuit, it appears that ARHS joined Dr.
Schutt as an involuntary plaintiff upon its own authority. While this
procedure appears irregular, our Supreme Court has specifically held that
involuntary joinder may be accomplished even in the absence of a specific
order from a civil trial court. See Onorato v. Wissahickon Park, Inc.,
244 A.2d 22, 24 (Pa. 1968) (in the absence of specific proceedings instituted
to effect involuntary joinder under the Pennsylvania Rules of Civil Procedure,
on the caption of
invalidate that joinder.
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action, brought against only one party where there exists no timely attempt
Moorehead
v. Lopatin
2227(b)] is applicable only where the substantive law provides that an
interest is joint and the holder of such interest refuses to join. Involuntary
joinder is necessary because without such joinder an indispensable party is
Kelly, 453 A.2d at 628.
Onorato v. Wissahickon Park, Inc., 244 A.2d 22 (Pa. 1968), is one
of the few precedents in Pennsylvania discussing the law concerning
involuntary plaintiffs.7 In that case, our Supreme Court held that, for
involuntary joinder under subsection 2227(b), the substantive law applicable
to a given case must explicitly permit such joinder. 244 A.2d at 25. This
the joinder issue reduces itself to whether, in the language of Rule 2227(b),
____________________________________________
7
Although more than forty-six years have passed since our Supreme
Court issued its decision in Onorato, that case continues to represent the
joinder. The High Court has issued two decisions since Onorato that
address involuntary joinder, albeit briefly. In Heckendorn v. Consolidated
Rail Corp., 456 A.2d 609 (Pa. 1983), and a decade later in CRY, Inc. v.
Mill Service, Inc., 640 A.2d 372 (Pa. 1994), our Supreme Court declined to
expand the substantive law permitting involuntary joinder. We read
Heckendorn and CRY, Inc. for the proposition that our Supreme Court has
not significantly altered involuntary joinder law since Onorato.
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Karoly v. Cap, 530 A.2d 436, 441 (Pa. Super. 1987) (quoting Onorato,
244 A.2d at 24-25).
In Onorato, our Supreme Court held that the law permitting
involuntary joinder is surpassingly narrow:
The Note of the Procedural Rules Committee to Rule 2227(b)
states that under present rules of substantive law,[8] proper
cases for joining a party as an involuntary plaintiff exist in only
the four instances where:
(1) The action is in rem.
(2) The unwilling person can be regarded as estopped by his
conduct from objecting to the prosecution of the suit
without his consent.
(3) The willing plaintiff and the unwilling person are joint
tenants or tenants by the entireties and the action is
brought to preserve or recover the jointly owned property
or damages for injury to such property.
(4) The action is equitable in nature and no recovery of money
damages is sought.
244 A.2d at 25. The fourth circumstance enumerated by our Supreme Court
in Onorato
action in this case sounds purely in equity, and ARHS does not seek
monetary damages. See
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8
Rule 2227(b) has been amended only twice since its inception in 1940.
The first amendment, on April 18, 1975, does not appear to have
substantively altered the text of Rule 2227(b). The second amendment, on
April 12, 1999, had no effect except to render the text gender-neutral. See
Pa.R.C.P. 2227 Historical Notes.
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Declaratory Relief, 8/7/2012, ¶¶27-35 (asserting causes of action for
damages); , 522 A.2d 1129, 1131
the case is
in the absence of a specific proceeding instituted for the purpose of
law. Onorato; Karoly, supra.9
Having
follows:
Rule 2227 does not provide an involuntary plaintiff with any
special status in the litigation, or otherwise provide that an
involuntary plaintiff is exempt from the other pleading provisions
____________________________________________
9
necessitated by the complicated nature of Pennsylvania precedent regarding
Pa.R.C.P. 2227(b). Specifically, although the text of subsection 2227(b)
Onorato states that no specific civil proceeding is required involuntarily to
join such a party to a lawsuit. See 244 A.2d at 24. Taken to its logical
conclusion in the context of Onorato, Rule 2227(b) appears to permit
involuntary joinder without the direct involvement of the trial court. Once a
long as the party qualifies under one of the categories enumerated by
Onorato. To be clear, current law does not
respect to involuntary joinder. Additionally, nothing currently requires an
involuntary plaintiff to demonstrate putative refusal to participate. In the
absence of guidance to the contrary from our Supreme Court, we must
countenance the instant joinder. Onorato, supra.
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contained in the Pennsylvania Rules of Civil Procedure. The trial
counterclaims could not be asserted against an involuntary
plaintiff. Research has failed to locate any appellate authority
for that proposition.5
5
The decision in Karoly[,] referenced at page 10 of the
id not
involve the assertion of counterclaims against an
indispensable party, and is not applicable here.
In Karoly
monies . . .
A.2d at 437. In an answer and new matter, the defendant asserted
counterclaims for monetary damages both against the plaintiff and against
several non-parties that had neither been held indispensable nor been joined
to the litigation. The plaintiff filed preliminary objections claiming that the
defendant had improperly joined the additional parties. Specifically, the
defendant in Karoly
include the names of these new parties as involuntary party-plaintiffs. Id.
at 439. Ultimately, a panel of this Court held that involuntary joinder in that
case was improper.
Karoly does not stand for the proposition that involuntary plaintiffs
are never subject to counterclaims. Rather, Karoly was decided upon the
plaintiffs was improper because the respective rights of the plaintiff and the
involuntary plaintiffs were not sufficiently interrelated. The Karoly panel
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held that the sole fact that a defendant has cognizable claims against non-
parties to a litigation does not permit that defendant, without more,
involuntarily to join those non-parties as plaintiffs pursuant to Rule 2227(b).
There was no determination made in Karoly that involuntary joinder acts as
a shield to immunize a party from otherwise proper counterclaims.
Turning to the instant case, it is clear that Karoly is inapplicable. Dr.
Schutt was determined to be an indispensable party pursuant to Rule
8/1/2012, at 3-4 (quoting Sprague, 550 A.2d at 189). In Karoly, there
was no determination that the putative involuntary plaintiffs were
t to assert claims of liability against Dr.
Dr. Schutt was an indispensable party to the litigation. After the trial court
agreed that Dr. Schutt was indispensable and ordered his joinder, ARHS
properly joined Dr. Schutt as an involuntary plaintiff. Once Dr. Schutt had
been properly joined as an involuntary plaintiff, he was subject to
counterclaims10 in the same fashion as any other party plaintiff.11
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10
Pa.R.C.P. 1031 governs counterclaims under Pennsylvania law:
(Footnote Continued Next Page)
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In light of the foregoing dis
against Dr. Schutt were barred under Pa.R.C.P. 2227(b). See T.C.O. at 10-
we conclude that Dr. Schutt was properly joined as an involuntary plaintiff,
we also vacate
this action upon the basis of allegedly improper joinder. See T.C.O. at 14.
Order vacated in part, and reversed in part. Case remanded for
further proceedings. Jurisdiction relinquished.
_______________________
(Footnote Continued)
Rule 1031. Counterclaim.
(a) The defendant may set forth in the answer under the
civil action which the defendant has against the plaintiff at
the time of filing the answer.
(b) A counterclaim need not diminish or defeat the relief
demanded by the plaintiff. It may demand relief
exceeding in amount or different in kind from that
demanded by the plaintiff.
11
Karoly also runs afoul of Pa.R.C.P.
provided by these rules, the joinder of parties in any action shall not affect
the procedural rights which each party would have if suing or sued
counterclaims against Dr. Schutt would be otherwise invalid on their face
rect interpretation of the
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/4/2014
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