Mark Hankin & Industrial v. Keystone Granite

J-A27008-21
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MARK HANKIN & INDUSTRIAL REAL : IN THE SUPERIOR COURT OF
ESTATE MANAGEMENT D/B/A : PENNSYLVANIA
HANMAR ASSOCIATES, MLP :
:
:
v. :
:
:
KEYSTONE GRANITE & TILE, INC. : No. 2209 EDA 2020
:
Appellant :
Appeal from the Order Entered October 23, 2020
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): No. 200701385
MARK HANKIN & INDUSTRIAL REAL : IN THE SUPERIOR COURT OF
ESTATE MANAGEMENT D/B/A : PENNSYLVANIA
HANMAR ASSOCIATES, MLP :
:
:
v. :
:
:
KEYSTONE GRANITE & TILE, INC. : No. 2212 EDA 2020
:
Appellant :
Appeal from the Order Entered October 23, 2020
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): No. 200701385
MARK HANKIN & INDUSTRIAL REAL : IN THE SUPERIOR COURT OF
ESTATE MANAGEMENT D/B/A : PENNSYLVANIA
HANMAR ASSOCIATES, MLP :
:
Appellants :
:
:
v. :
: No. 2220 EDA 2020
:
KEYSTONE GRANITE & TILE, INC. :
J-A27008-21
Appeal from the Order Entered October 23, 2020
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): No. 200701385
MARK HANKIN & INDUSTRIAL REAL : IN THE SUPERIOR COURT OF
ESTATE MANAGEMENT D/B/A : PENNSYLVANIA
HANMAR ASSOCIATES, MLP :
:
Appellants :
:
:
v. :
: No. 2293 EDA 2020
:
KEYSTONE GRANITE & TILE, INC. :
Appeal from the Order Entered October 23, 2020
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): No. 200701385
BEFORE: PANELLA, P.J., DUBOW, J., and McCAFFERY, J.
MEMORANDUM BY PANELLA, P.J.: FILED FEBRUARY 18, 2022
Mark Hankin & Industrial Real Estate Management d/b/a/ HanMar
Associates, MLP (“HanMar”), and Keystone Granite & Tile, Inc. (“Keystone”),
cross-appeal from the orders confirming the five arbitration awards entered in
favor of HanMar, confirming the arbitration award of costs and fees in favor
of HanMar, denying the remainder of HanMar’s petition to partially confirm
and partially vacate and modify the arbitration award, and denying Keystone’s
petition to partially confirm and partially vacate and modify the arbitration
award. The practical effect of the trial court’s two orders was to confirm the
awards in favor of HanMar, while vacating the awards in favor of Keystone but
refusing to otherwise modify the arbitration award. We affirm.
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Keystone leased warehouse space from HanMar pursuant to a 5-year
lease dated November 19, 2012, that expired on February 28, 2018. The lease
required Keystone to give HanMar at least one year’s notice of Keystone’s
intent not to renew the lease. On October 27, 2016, Keystone provided
HanMar with written notice of its intention not to renew the lease.1
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1 The relevant portion of the lease provides as follows:
25. Extensions – Renewals – CPI Escalator.
A. Extensions. Lessee may terminate this Lease at the end of this
term and any Renewal Term or Extension Term, by giving to
Lessor written notice at least one (1) year prior thereto …; but in
default of a timely Expiration Notice …, this Lease shall continue
for an Extension Term equal to the original term hereof
(“Extension Term”) commencing the day after the expiration of
the current term …. In the event that Lessee … shall have given a
valid and timely Expiration Notice, and Lessee shall fail or refuse
to completely vacate the Premises and restore the same to the
condition required in this Lease on or before the end of the term
hereof (“Expiration Date”), then it is expressly agreed that Lessor
shall have the option either:
(i) to disregard the Expiration Notice as having no force and
effect, whereupon the Expiration Notice shall be null and void,
ab initio, as if never given; or
(ii) treat Lessee as Holding Over, in accordance with paragraph
2(C) hereof.
See Keystone’s Response in Opposition, 8/14/20, Exhibit A (Lease
Agreement), at ¶ 25(A); see also id., at § 2(C) (providing that if Lessee
remains in possession of the Premises or fails to restore the Premises as
dictated by the lease, holding over creates a month-to-month tenancy, for
which the monthly installment of Minimum Annual Rent triple that required
under the Minimum Annual Rent payment effective on the last day of the
preceding term).
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Pursuant to this notice, the lease required Keystone to restore the leased
premises to a specified condition, to complete an Environmental Study of the
premises, and to fully vacate the premises prior to February 28, 2018. If
Keystone failed any of these requirements, the lease agreement provided
HanMar with an option to consider the lease automatically renewed despite
Keystone’s prior notice.
On March 1, 2018, HanMar concluded that Keystone had failed to timely
vacate the premises and failed to restore the premises to the specified
condition. HanMar subsequently billed Keystone for rent pursuant to the lease
agreement. Keystone filed a declaratory judgment action in the Court of
Common Pleas of Montgomery County, seeking a determination that the lease
had not been renewed. HanMar filed preliminary objections, and the
Montgomery County action was stayed to permit the parties to arbitrate their
dispute pursuant to the terms of the lease agreement.
HanMar submitted seven individual disputes to be arbitrated. Under the
lease agreement, the parties were required to submit proposed awards for
each dispute, and the arbitrator was limited to choosing between the two
proposed awards in resolving each issue. In other words, the arbitrator had
only two options for resolving each dispute—HanMar’s proposal or Keystone’s
proposal. The lease agreement also specifically provided that the arbitrator
did not have the power to award punitive damages.
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The arbitrator entered an award that found in favor of HanMar for all of
the disputes except Dispute #3 and Dispute #5. In Disputes #3 and #5,
HanMar’s proposed awards stated that HanMar had properly exercised its
option to treat the lease as automatically renewed.
In contrast, Keystone’s proposed awards provided that the lease
agreement was unconscionable. While HanMar argued to the arbitrator that
Keystone’s responses were untimely under the lease agreement, the arbitrator
rejected HanMar’s arguments and accepted Keystone’s responses.
In the decision, the arbitrator stated there was no dispute that Keystone
did not deliver an Environmental Study to HanMar, as required by paragraph
27(B) of the Lease. See Keystone’s Response in Opposition, 8/14/20, Exhibit
B (Arbitration Award), at 2. However, the arbitrator found certain provisions
of the lease agreement unconscionable and held that Keystone had
substantially complied with the terms of the lease. See id., at 4-9.
As a result, the arbitrator entered each of HanMar’s Proposed Awards,
except Proposed Awards #3 and #5, based upon the conclusions that those
Proposed Awards constituted a penalty. See id., at 13. The arbitrator also
entered two of Keystone’s Proposed Awards: (i) declaring that the initial lease
term terminated on February 28, 2018, and (ii) declaring that Keystone’s
October 27, 2016 written expiration notice was valid and enforceable. See id.,
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at 16-17. Finally, the arbitrator awarded HanMar costs and fees totaling
$119,067.00.2 See id., at 20.
On July 22, 2020, HanMar filed in the Montgomery Court of Common
Pleas a petition to partially confirm and partially vacate and modify the
arbitration award and to confirm the award of attorneys’ fees, expenses and
costs and reimbursement of arbitration costs.3 HanMar argued that in failing
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2 HanMar submitted an attorneys’ fees certification claiming that HanMar
incurred a total of $135,495.46 for legal feels, costs, arbitration expenses and
court reporter fees. See HanMar’s Motion to Partially Confirm and Partially
Vacate and Modify Arbitration Award, 7/22/20, Exhibit B (Arbitration Award),
at 19-20. The arbitrator also reviewed evidence that HanMar estimated the
costs to repair the leased premises was approximately $114,000.00, and the
environmental study would cost an estimated $1,500.00. See id., at 20. The
arbitrator concluded that the total claimed fees were not reasonable and
proportionate, and limited the reimbursement of fees and expenses to
$100,000.00. See id. The arbitrator further detailed the fees associated with
the arbitration proceedings and the American Arbitration Association’s
administrative fees and directed Keystone to reimburse HanMar in the amount
of $19,067.15. See id.
3 Regarding the timeliness of HanMar’s petition, we note that a party must
challenge an arbitration award within 30 days of the date on which the award
was entered. See 42 Pa.C.S.A. § 7342(b) (providing that a court shall confirm
an arbitration award after 30 days); see also U.S. Claims, Inc. v.
Dougherty, 914 A.2d 874, 877 (Pa. Super. 2006) (stating that a party’s
failure to file a petition to vacate or modify an arbitration award within 30 days
will result in waiver of claims). Instantly, 30 days following the entry of the
arbitration award was March 26, 2020. However, as part of the statewide
judicial emergency declared as a result of the COVID-19 pandemic, the
Pennsylvania Supreme Court directed that any pleadings that “are required to
be filed between March 19, 2020, and May 8, 2020, generally SHALL BE
DEEMED to have been timely if they are filed by close of business on May 11,
2020.” See In re General Statewide Judicial Emergency, 230 A.3d 1015(Pa. filed April 28, 2020) (per curiam). The parties originally filed their
petitions in the Court of Common Pleas of Montgomery County prior to May
(Footnote Continued Next Page)
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to enter its Proposed Awards #3 and #5, the arbitrator exceeded the scope of
its jurisdiction as set forth in the arbitration agreement. HanMar therefore
asked the court to vacate any “award” entered as to Proposed Awards #3 and
#5, and to confirm the arbitrator’s decision in all other respects.
On July 24, 2020, the trial court entered an order granting HanMar’s
petition in its entirety. Specifically, regarding Disputes #3 and #5, the trial
court vacated the arbitrator’s determination, and entered HanMar’s Proposed
Awards #3 and #5.
On July 28, 2020, in response to HanMar’s petition, Keystone filed its
own petition to partially confirm and partially vacate and modify the arbitration
awards and to set aside the award of costs and fees. Keystone argued that
HanMar was not entitled to attorneys’ fees because paragraph 38(A)(viii) is
unconscionable. See Keystone’s Petition to Partially Confirm and Partially
Vacate and Modify the Arbitration Awards, 7/28/20, at 13-25. Keystone also
argued that HanMar’s attorneys’ fees certification was excessive and
disproportionate. See id., at 25-30. Additionally, Keystone asked the court to
vacate the awards entered in favor of HanMar, to confirm the awards entered
in favor of Keystone, and to enter Keystone’s remaining Proposed Awards.
See id., at 31-52.
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11, 2020. The court concluded that venue was improper in Montgomery
County and entered an order on July 15, 2020, directing the parties to re-file
the petitions in Philadelphia County. Because HanMar promptly filed its
petition in Philadelphia County, we deem it timely filed.
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On August 3, 2020, Keystone filed a motion for reconsideration of the
trial court’s order granting HanMar’s petition, claiming that the court had
improperly granted the petition without affording Keystone 20 days to
respond. HanMar filed responses to Keystone’s petition and motion. On August
5, 2020, the trial court vacated its July 24, 2020 order and directed Keystone
to file a response to HanMar’s petition to partially affirm and partially vacate
the arbitration award. Keystone timely complied.
On October 23, 2020, the trial court entered two separate orders
addressing the parties’ respective petitions. Responding to HanMar’s petition,
the trial court confirmed the awards entered in HanMar’s favor, confirmed the
award for costs and fees, and denied HanMar’s petition in all other respects.
Importantly, in distinction from its July 24, 2020 order, the trial court refused
HanMar’s request to vacate the arbitrator’s decision on Disputes #3 and #5.
As to Keystone’s petition, the trial court denied the petition, concluding that
the lease as a whole was neither unconscionable nor a contract of adhesion
because Keystone, as a corporation, did not establish that it lacked choice and
equal bargaining power.4 HanMar and Keystone each filed timely appeals from
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4 In its Opinion, the trial court also explained that it did not confirm the
arbitration award as to Keystone’s Proposed Awards (i) and (ii) because they
were untimely filed, and the arbitrator lacked jurisdiction to consider them.
See Trial Court Opinion, 3/12/21, at 4.
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both orders and court-ordered Pa.R.A.P. 1925(b) concise statements of errors
complained of on appeal.5, 6
Because paragraph 38(A) of the Lease Agreement provides for a final
and binding arbitration under the rules of the American Arbitration
Association, this is a matter of common law arbitration. See Dougherty, 914
A.2d at 876. We employ a limited standard of review in appeals from trial
court orders confirming an arbitration award:
The award of an arbitrator in a nonjudicial arbitration which is not
subject to (statutory arbitration) or to a similar statute regulating
nonjudicial arbitration proceedings is binding and may not be
vacated or modified unless it is clearly shown that a party was
denied a hearing or that fraud, misconduct, corruption or other
irregularity caused the rendition of an unjust, inequitable or
unconscionable award. The arbitrators are the final judge of both
law and fact, and an arbitration award is not subject to reversal
for a mistake of either. A trial court order confirming a common
law arbitration award will be reversed only for an abuse of
discretion or an error of law.
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5 We observe that the October 23, 2020 orders, when read together,
ultimately confirm the arbitrator’s award with respect to all issues except
HanMar’s contention that the lease automatically renewed; the orders denied
confirmation or modification of the lease renewal rulings. Further, following
praecipe by HanMar, judgment was entered on the orders. Accordingly, this
appeal is properly before us. See 42 Pa.C.S.A. § 7342 (directing that 42
Pa.C.S.A. § 7321.29, except subsection (a)(4), be applied to common law
arbitration proceedings); 42 Pa.C.S.A. § 7321.29 (allowing appeals from
orders confirming or denying confirmation of an arbitration award and from
final judgments entered after an award has been confirmed, vacated without
a re-hearing, or modified).
6These appeals were entered on four separate Superior Court dockets. Upon
motion by HanMar, this Court consolidated the appeals for review.
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Id. (citations, quotation marks and brackets omitted); see also Roccograndi
v. Martin, 214 A.3d 251, 256 (Pa. Super. 2019) (stating that “[t]he standard
of review in arbitration confirmation cases is whether, in interpreting the
award, the trial court exceeded its scope of authority by an abuse of discretion
or error of law.”).
On appeal, the cross-appellants each raises multiple claims for our
review. See HanMar’s Brief at 4-5; Keystone’s Brief at 7-12.7, 8 For ease of
discussion, we will address related claims together. All of the parties’ claims
can be grouped into one of four categories: (1) HanMar’s claim that 42
Pa.C.S.A. § 7342(b) required the trial court to confirm its Proposed Awards;
(2) HanMar’s contention that the arbitrator acted without authority in failing
to conclude that the lease had automatically renewed; (3) Keystone’s
contention that the entire lease agreement was unconscionable and
unenforceable; and (4) Keystone’s claim that the arbitrator’s award was so
ambiguous as to be unenforceable.
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7 Keystone’s statement of questions involved includes a subsection (B.), which
was not specifically included in its Pa.R.A.P. 1925(b) concise statement of
errors complained of on appeal. However, the issues in subsection (B.) restate
the issues presented in subsection (A.), though they are rephrased to
challenge whether the trial court erred in granting HanMar’s petition. Thus,
while we decline to deem these issues waived, we need not separately address
the arguments raised therein.
8 Unless otherwise indicated, we will cite the parties’ arguments from the brief
for which they are identified as the appellant in these cross-appeals.
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We will first address HanMar’s assertion that the arbitrator was required
to confirm its Proposed Awards #3 and #5 under 42 Pa.C.S.A. § 7342(b). See
HanMar’s Brief at 37. HanMar argues that because the trial court refused to
enter HanMar’s Proposed Awards #3 and #5 and denied Keystone’s petition
to confirm the entry of its own Proposed Awards, there is effectively no
confirmed award for Disputes #3 and #5. See id., at 38.
Section 7342(b) provides that, “[o]n 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.A. § 7342(b). “This language has been interpreted as mandatory.”
Vogt v. Liberty Mut. Fire Ins. Co., 900 A.2d 912, 919 (Pa. Super. 2006).
However, this language has consistently been interpreted as a limitation
period. See Sage v. Greenspan, 765 A.2d 1139, 1142 (Pa. Super. 2000). As
such, it requires that any challenge to a common law arbitration award be
filed within thirty days. See id. If a challenge is filed after thirty days, it is
untimely and deemed waived. See id.Here, HanMar clearly petitioned the trial court to vacate or modify the
arbitrator’s award, and Keystone followed suit. Since the condition precedent
(no challenge to the award within thirty days) was not met, section 7342(b)’s
mandate for confirmation does not apply. HanMar’s contention that section
7342(b) requires confirmation of its Proposed Awards merits no relief.
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Next, we will address HanMar’s claim that the arbitrator, and by
extension, the trial court, erred in failing to conclude the lease had been
automatically renewed. HanMar contends that the arbitrator exceeded his
jurisdiction by failing to enter its Proposed Awards #3 and #5. See HanMar’s
Brief at 19. According to HanMar, because Keystone did not timely submit its
Proposed Awards, the arbitrator’s only option was to enter HanMar’s Proposed
Awards #3 and #5. See id., at 21; see also id., at 24-25 (arguing that “[t]he
Arbitrator could not have been more wrong in his conclusions that he had the
authority to disregard the express provisions of the arbitration clause that
limited his authority to picking from the eligible Proposed Awards timely
submitted.”).
HanMar argues that by concluding that the challenged provisions were
punitive, the arbitrator made “other findings” in violation of the arbitration
provision. See id., at 25-28. Additionally, HanMar asserts that the arbitrator
erred in concluding that its Proposed Awards #3 and #5 constituted a penalty.
See id., at 31; see also id., at 32-33 (arguing that its Proposed Awards did
not seek punitive damages).
By contrast, Keystone argues that the arbitrator properly declined to
enter HanMar’s Proposed Awards #3 and #5. See Keystone’s Brief at 58-61.
Keystone claims that HanMar failed to establish actual damages to support
the imposition of a liability of over $403,000.00. See id., at 60. Keystone also
asserts that the trial court erred by reversing the arbitrator’s entry of its
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Proposed Awards (i) (finding the lease terminated February 28, 2018) and (ii)
(finding Keystone’s written notice to terminate the lease was effective to avoid
automatic renewal of the lease). See id., at 62-65.9
Paragraph 38 of the lease agreement sets forth the arbitration process:
38. Miscellaneous.
A. Any and all controversies, claims or disputes of any kind or
nature whatsoever arising out of or relating in any way to this
Lease, including controversies, disputes or claims involving
performance under this Lease or breach thereof, shall be settled
by final and binding arbitration administered by the American
Arbitration Association in Philadelphia, Pennsylvania under its
Commercial Arbitration Rules as modified herein. The
modifications contained herein shall supersede the American
Arbitration Association’s commercial arbitration rules and shall be
construed as jurisdictional. Notwithstanding the foregoing, or
anything else contained to the contrary, Lessor [HanMar] retains
the right and may avail itself of any and all rights and remedies
as provided for or pursuant to this Lease in any court of competent
jurisdiction including exercising the warrants of attorney to
confess judgment, money damages, ejectment, or possession.
Further, nothing contained herein shall be construed to limit
Lessor’s right to obtain equitable relief whatsoever in a court of
competent jurisdiction.
Judgment upon any award rendered by the American
Arbitration Association may be entered in any court having
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9 Keystone does not acknowledge the untimely filing of its counterclaim and
Proposed Awards, nor does Keystone support its argument with discussion of
pertinent legal authorities beyond citations to our standard of review. See
Pa.R.A.P. 2119(a) (requiring an appellant’s argument to include “such
discussion and citation of authorities as are deemed pertinent.”). Keystone
baldly asserts that the arbitrator’s failure to enter its Proposed Awards was
“ambiguous,” and fails to support its claims with citation and discussion of
relevant authorities. See Pa.R.A.P. 2119(a); see also Commonwealth v.
Reyes-Rodriguez, 111 A.3d 775, 781 (Pa. Super. 2015) (stating that
“[w]hen an appellant cites no authority supporting an argument, this Court is
inclined to believe there is none.”).
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jurisdiction thereof. The following standards which shall be
construed as jurisdictional, shall supplement the regulations of
the American Arbitration Association and shall control in the event
of a conflict:
(i) Lessee shall file its request for arbitration with the
Philadelphia office of the American Arbitration Association
within thirty (30) days after the controversy, controversies,
claim(s) or dispute(s) first arose and the failure of the Lessee
to file a timely claim … shall be deemed a waiver of Lessee’s
rights with respect to such controversy, controversies, claim(s)
or dispute(s) and full award shall be granted to Lessor with
respect to all claims raised by Lessee. At Lessor’s request, the
timeliness of the submission shall be addressed and resolved
on a preliminary basis and prior to commencement of any
proceedings on the merits of such claims.
(ii) Within twenty (20) days of filing the claim, the claimant
shall submit its proposed award(s) (the “Proposed Award”) to
the American Arbitration Association with a copy to respondent.
Within twenty (20) days after claimant’s submission of its
Proposed Award, the respondent shall submit its Proposed
Award to the American Arbitration Association. The
respondent’s failure to submit its Proposed Award
within said twenty (20) days shall be deemed untimely
and the arbitrator shall have no jurisdiction to consider
it.
(iii) Each individual item of dispute (an “Individual Dispute”)
shall be submitted as a separate Proposed Award for decision
making purposes. The arbitrator shall rule on each Individual
Dispute in the parties’ respective proposed awards.
(iv) The arbitrator shall have jurisdiction to enter only
one Proposed Award with respect to each Individual
Dispute from the Proposed Awards submitted by one or
the other party, together with all amounts payable under
paragraph 38 and may not make other findings. The
arbitrator shall have neither authority nor jurisdiction to
award punitive damages. The award of the arbitrator shall
be supported by a reasoned opinion including a finding
regarding the reasons for the decision, findings of fact, and
citations to the relevant provisions of this Lease and/or legal
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authority with respect to each item in dispute or with respect
to as many items of the dispute as requested by either party.
***
(viii) All costs and expenses of arbitration, including the
arbitrator’s fee, shall be taxed against and paid by the losing
party (the “losing party” who shall be defined as the party who
has been awarded less than the other party) and shall be added
to the award. Each party shall bear its own attorneys fees,
except that if the arbitration is brought as a result of a
claim for payments of Minimum Annual Rent and/or
Additional Rent from the Lessee and Lessor shall be the
winning party….
Keystone’s Response in Opposition, 8/14/20, Exhibit A (Lease Agreement), at
¶ 38 (emphasis added).
Regarding HanMar’s Proposed Award #3, the arbitrator acknowledged
that Keystone did not timely vacate the premises, “although only by a day[.]”
Keystone’s Response in Opposition, 8/14/20, Exhibit B (Arbitrator’s Award),
at 12. The arbitrator stated that Keystone’s liability for an extended 5-year
lease term totaled $403,275.00. See id. By contrast, HanMar’s estimated
their repair costs at $114,000.00 and the cost of the Environmental Study was
estimated at $1,500.00. See id. Accordingly, the arbitrator stated that “[b]y
[HanMar] exercising its option to extend the Commercial Lease for five years
they called for payment of approximately 3.5 times the damages they have
allegedly suffered.” Id. The arbitrator declined to enter the award, concluding
that it constituted a penalty. See id., at 13; see also id. (leaving open the
option for HanMar to seek actual damages sustained as a result of the breach).
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As to Proposed Award #5, the arbitrator relied on its reasoning set forth
regarding Proposed Award #3. See id., at 14.
On review, the trial court agreed with the arbitrator’s conclusion that
HanMar’s Proposed Awards #3 and #5 constituted a penalty. See Trial Court
Opinion, 3/12/21, at 6, 9-10; see also id., at 9 (concluding that HanMar’s
Proposed Award #3 “requested damages exceeding the compensatory
damages needed to restore the Premises and return [HanMar] to its position
prior to the breach.”). The trial court also concluded that because Keystone’s
corresponding Proposed Awards were untimely filed, the arbitrator lacked
jurisdiction to entertain them. See id., at 16.
We begin by noting that the assumption underlying HanMar’s argument
raises a novel issue under Pennsylvania law. Because the lease agreement
defines certain procedural directives for the arbitration as “jurisdictional,” it
contends that Pennsylvania courts have the power to vacate the arbitrator’s
award if the court concludes the arbitrator erred in applying these procedural
directives. And HanMar is correct in noting that our jurisprudence has
established that challenges to the jurisdiction of an arbitration tribunal must
be decided by a court. See Civan v. Windermere Farms, Inc., 180 A.3d
489, 495 (Pa. Super. 2018). However, the jurisdiction at issue in our
precedents has always been whether a party consented to arbitration of the
dispute at issue. See id.- 16 -
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Here, there is no dispute that the parties agreed to arbitrate the dispute
about whether the lease automatically renewed; both parties submitted
proposed awards on the issue to the arbitrator. Therefore, generally, the
question of the proper procedure to be followed during arbitration is “reserved
for the arbitrators.” Shamokin Area School Auth. V. Farfield Co., 454 A.2d
126, 127 (Pa. Super. 1982). Whether that general rule is overridden by the
parties’ defining certain procedural requirements as jurisdictional is an open
question in Pennsylvania law. See, e.g., U.S. Spaces, Inc. v. Berkshire
Hathaway Home Servs. Fox & Roach, 165 A.3d 931, 934 (Pa. Super. 2017)
(observing that “[j]udicial review of a common law arbitration award is
severely limited as otherwise arbitration would be an unnecessary stage of
litigation, causing only delay and expense without settling the dispute”).
However, we need not reach this issue, as even if we accept HanMar’s
position that the lease agreement has made these procedural directives
jurisdictional, we conclude HanMar is due no relief. In HanMar’s view, because
paragraph 38(A)(iv) requires the arbitrator to choose between the parties’
proposed awards, the arbitrator—and subsequently, the reviewing trial court—
was compelled to enter HanMar’s Proposed Awards #3 and #5. However,
paragraph 38(A)(iv), which HanMar contends is jurisdictional, also prohibits
the arbitrator from entering an award of punitive damages. See Keystone’s
Response in Opposition, 8/14/20, Exhibit A (Lease Agreement), at ¶ 38(A)(iv).
The lease agreement does not define “punitive damages.” HanMar asserts that
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“punitive damages,” as used in the lease agreement, “refers to a punitive
damages claim in an ad damnum clause, i.e., requested relief of a monetary
punitive damage in excess of compensatory damages in order to punish a
defendant.” HanMar’s Brief at 32. However, HanMar points to no place in the
record reflecting any agreement between the parties concerning how this term
would be construed under the lease. Therefore, construction of the term
“punitive damages” was a question of law and fact appropriately tasked to the
arbitrator. See Civan, 180 A.3d at 493.
The trial court did not conclude that the arbitrator’s finding was
unconscionable or the result of procedural irregularity. And we can find no
error in the trial court’s determination. Further, we discern no abuse of
discretion or legal error by the trial court in failing to substitute HanMar’s
Proposed Awards #3 and #5. Accordingly, HanMar’s arguments that the trial
court erred in failing to find the lease automatically renewed merits no relief.
Next, we turn to Keystone’s challenges to the enforceability of the lease
and the related challenge to the award of attorneys’ fees. Keystone argues
that the arbitrator’s entry of an award for attorneys’ fees, costs, expenses and
arbitration costs was “ambiguous” and “in need of clarification.” Keystone’s
Brief at 20. According to Keystone, paragraph 38(A)(viii) (concerning costs,
fees and expenses) is procedurally and substantively unconscionable. See id.,
at 21. Keystone points to the portion of paragraph 38(A)(viii) that allows
HanMar to recover its expenses and attorneys’ fees if HanMar succeeds on a
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claim seeking minimum annual rent or additional rent from Keystone;
Keystone highlights the fact that there is no reciprocal provision which would
make HanMar responsible for Keystone’s expenses and fees. See id., at 26,
27-28, 37.
Additionally, Keystone argues that the commercial lease is a contract of
adhesion, and Keystone lacked the ability to modify any unfavorable contract
terms. See id., at 29. Keystone claims that the parties have unequal
bargaining power, because Keystone’s president, Mustafa Kol, has only a high
school education and is a Turkish immigrant, while Mark Hankin has been a
real estate developer since the 1970s. See id., at 25-26, 30, 31-32.
In response, HanMar contends Keystone did not establish that it lacked
equal bargaining power or meaningful choice. See HanMar’s Brief as Appellee
at 32. HanMar claims that Kol has been a citizen of the United States since
2006, and Keystone was represented through the transaction by a full service
commercial real estate brokerage firm. See id., at 32-33. HanMar also directs
our attention to two addenda to the lease agreement in support of its assertion
Keystone was able to negotiate lease terms. See id., at 35 n.4.
Commercial leases are governed by contract law principles. See
Gamesa Energy USA, LLC v. Ten Penn Ctr. Assocs., L.P., 217 A.3d 1227,
1238 (Pa. 2019). “An adhesion contract is a standard-form contract prepared
by one party, to be signed by the party in a weaker position, usually a
consumer, who adheres to the contract with little choice about the terms.”
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Am. S. Ins. Co., Inc. v. Halbert, 203 A.3d 223, 228 (Pa. Super. 2019)
(citation omitted); see also Todd Heller, Inc. v. United Parcel Serv., Inc.,
754 A.2d 689, 700 (Pa. Super. 2000) (explaining that the hallmark of an
adhesion contract is the lack of equal bargaining power between the parties).
Even where a contract is one of adhesion, it is not necessarily
unconscionable and unenforceable as a matter of law. See Salley v. Option
One Mortg. Corp., 925 A.2d 115, 127 (Pa. 2007).
[A] contract or term is unconscionable, and therefore avoidable,
where there was a lack of meaningful choice in the acceptance of
the challenged provision and the provision unreasonably favors
the party asserting it. The aspects entailing lack of meaningful
choice and unreasonableness have been termed procedural and
substantive unconscionability, respectively. The burden of proof
generally concerning both elements has been allocated to the
party challenging the agreement, and the ultimate determination
of unconscionability is for the courts. Nevertheless, where
material facts are disputed, for example, concerning the general
commercial background underlying a challenged transaction
and/or the commercial needs of a particular trade, fact finding
may be necessary.
Id. at 119-20 (footnotes and internal citations omitted).
Here, the arbitrator concluded that the lease agreement constituted a
contract of adhesion, and Keystone had no choice but to accept the terms.
See Keystone’s Response in Opposition, 8/14/20, Exhibit B (Arbitrator’s
Award), at 6.10 The trial court, in reviewing the arbitrator’s award, concluded
that Keystone failed to prove that it lacked any meaningful choice regarding
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10 We observe, however, that the arbitrator primarily discussed the time for
filing arbitration claims and proposed awards in rendering its decision.
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the lease terms. See Trial Court Opinion, 3/12/21, at 13-14. The trial court
therefore refused to confirm those portions of arbitrator’s award that found
the lease to a contract of adhesion. Our review confirms the trial court’s
conclusion.
The instant case involves a dispute arising out of a commercial lease
agreement, in which Keystone, the lessee, is a corporation. In such settings,
we generally presume that parties executing a commercial lease have
relatively equal bargaining power. See Cambria-Stoltz Enters. v. TNT
Invs., 747 A.2d 947, 950 (Pa. Super. 2000). As the trial court aptly noted,
Keystone was represented by a full service commercial real estate brokerage
throughout the execution of the lease agreement; Keystone contemplated
purchasing the leased premises; Keystone had experience in executing and
negotiating commercial leases for other venues; and, through its commercial
broker, Keystone had the opportunity to either negotiate the lease terms or
consider additional properties. See Trial Court Opinion, 3/12/21, at 13-14.
While this is undoubtedly a scenario in which one party exerted its
substantially superior bargaining power to obtain favorable contract terms, we
cannot say the lease agreement was unquestionably a contract of adhesion as
a matter of law. As a result, we can discern no abuse of discretion or legal
error by the trial court. No relief is due on these claims.
Keystone further argues that the attorneys’ fees award is
disproportionate and excessive. See Keystone’s Brief at 38-41. Keystone
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claims that the fee certification provided by HanMar is excessive in relation to
the nature of the dispute, and instead, is punitive in nature. See id., at 39.
Further, Keystone asserts that HanMar’s fee certification should be reduced
by any amount incurred through their pursuit of unconscionable claims. See
id., at 41-46.
Keystone fails to provide any legal support for these claims. See
Pa.R.A.P. 2119(a). Accordingly, these claims are waived. See Lackner v.
Glosser, 892 A.2d 21, 29 (Pa. Super. 2006) (stating that “arguments which
are not appropriately developed are waived. Arguments not appropriately
developed include those where the party has failed to cite any authority in
support of a contention.”) (citation omitted).11
In each of its remaining claims, Keystone challenges the remaining
awards entered in favor of HanMar as “ambiguous” and “in need of
clarification.” See Keystone’s Brief at 47-58. Keystone argues that the
arbitrator’s awards are “speculative and ambiguous with respect to damages
and with respect to the determination of who was the prevailing party for the
purpose of awarding attorney’s fees….” Id. at 50. However, Keystone’s final
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11 Our review reveals that Keystone did not challenge the award of counsel
fees as disproportionate and excessive in its court-ordered Pa.R.A.P. 1925(b)
concise statement. For this reason, as well, these claims are waived. See
Pa.R.A.P. 1925(b)(4)(vii) (providing that “[i]ssues not included in the
Statement … are waived.”); In re Estate of Daubert, 757 A.2d 962, 963 (Pa.
Super. 2000) (explaining that issues not raised in a Rule 1925(b) concise
statement are deemed waived).
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claims are largely underdeveloped, and provide no legal authority to support
these contentions. See Pa.R.A.P. 2119(a). “This Court will not act as counsel
and will not develop arguments on behalf of an appellant.” Bombar v. West
Am. Ins. Co., 932 A.2d 78, 93 (Pa. Super. 2007). Accordingly, these claims
are waived.
Even if not waived, Keystone has failed to establish the trial court erred.
Once again, the final arbiter of both law and fact was the arbitrator. Keystone
has failed to establish under the appropriate standard of review that judicial
intervention with the arbitrator’s award is appropriate. No relief would be due
even if Keystone had not waived this issue.
Based upon the foregoing, we affirm the trial court orders confirming
the five arbitration awards entered in favor of HanMark, confirming the
arbitration award of costs and fees in favor of HanMark, denying the remainder
of HanMar’s petition to partially confirm and partially vacate and modify the
arbitration award, and denying Keystone’s petition to partially confirm and
partially vacate and modify the arbitration award.
Orders affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/18/2022
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