Doe, J. v. Hand & Stone Franchise

J-A07004-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JANE DOE : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
HAND & STONE FRANCHISE :
CORPORATION, RUFFENACH G., LLC T/A :
HAND & STONE PHOENIXVILLE-OAKS : No. 2166 EDA 2020
SPA, CATHERINE RUFFENACH, GERARD :
RUFFENACH, STEVEN M. WALDMAN, :
STEVEN WALDMAN MASSAGE AND :
GROUPON, INC. :
:
:
APPEAL OF: GROUPON, INC :
Appeal from the Order Entered October 5, 2020
In the Court of Common Pleas of Philadelphia County Civil Division at No(s):
No. 200600914
BEFORE: DUBOW, J., McLAUGHLIN, J., and KING, J.
MEMORANDUM BY DUBOW, J.: FILED JULY 25, 2022
Appellant, Groupon, Inc. (“Groupon”), appeals from the October 5,
2020 Order entered in the Philadelphia County Court of Common Pleas
overruling its preliminary objections to compel arbitration and stay
proceedings.1 After careful review, we reverse.
The relevant facts and procedural history are as follows. On June 19,
2020, Appellee, Jane Doe, filed a complaint against numerous defendants
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1 This interlocutory appeal is authorized by Pa.R.A.P. 311(a)(8) (permitting
an interlocutory appeal from any order that is made appealable by statute),
and the Uniform Arbitration Act, 42 Pa.C.S. § 7320(a)(1), which provides
that an appeal may be taken from “[a] court order denying an application to
compel arbitration[.]”
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including Groupon.2 Appellee alleged that, on June 19, 2018, Steven
Waldman, a massage therapist working at Steven Waldman Massage,
sexually assaulted her during a massage service.3 Appellee’s son (“Son”),
who is not a party to the lawsuit, purchased a discount voucher for the
massage service from Groupon and gave it to Appellee as a Mother’s Day
gift.
On September 4, 2020, Groupon filed Preliminary Objections to
Compel Arbitration and to Stay Proceedings. In the preliminary objections,
Groupon explained that when a customer creates an account to purchase
goods and services on the Groupon platform, the customer must read and
affirmatively manifest consent to Groupon’s terms of use (“TOU”). Groupon
further explained that when a customer purchases a voucher for services
using the platform, she again must manifest consent to the same TOU
before finalizing the purchase. Relevantly, the TOU include a contractual
provision requiring all disputes involving Groupon to be resolved exclusively
in binding arbitration before the American Arbitration Association. The
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2 Groupon is an online marketing platform used by merchants to advertise
and sell their goods and services, generally at a discount.
3 Appellee alleged, inter alia, that the defendants, including Groupon, were
liable to her for “failing to report [] Waldman’s dangerous propensities and
criminal conduct to either law enforcement, the Pennsylvania State Board of
Massage Therapy, and/or prospective customers in the public-at-large.”
Complaint, 6/19/20, at ¶ 13.
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voucher also provides that “[p]urchase, use, or acceptance of this voucher
constitutes acceptance of these terms [of use].”
In the preliminary objections, Groupon asserted that when Appellee
presented the massage voucher to Stephen Waldman, Appellee redeemed it
for the massage service. Groupon concluded that Appellee’s affirmative
action of redeeming the voucher demonstrated Appellee’s acceptance of the
terms of the voucher, including the arbitration provision. Groupon,
therefore, requested that the trial court stay the case and compel arbitration
as required by the TOU.
On September 24, 2020, Appellee filed a Response to Groupon’s
preliminary objections. In her response, Appellee denied that she had ever
received, read, accepted, agreed to and/or consented to Groupon’s website’s
TOU. She argued that she was not bound by the arbitration provision in the
TOU because Son, and not Appellee, purchased the voucher and had merely
sent Appellee a screenshot of the voucher via text message. She claimed
that the screenshot that she redeemed for the massage service did not
reference an arbitration agreement. She further denied that by redeeming
the voucher, she had agreed to be bound by the TOU on Groupon’s website,
noting that the voucher itself did not require Appellee to review the TOU and
the only reference on the voucher to Groupon’s website was: “For more
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information, visit http://gr.pn/deal-terms.”4 Appellee argued that this
ambiguous reference “would not alert any reasonable customer that he or
she is entering into an arbitration agreement and waiving legal rights.”
Response, 9/24/20, at ¶ 6.
On October 5, 2020, the trial court overruled Groupon’s preliminary
objections to compel arbitration and stay proceedings. On October 20,
2020, Groupon filed a Motion for Reconsideration of the court’s order
overruling its preliminary objections. Relevant to the instant appeal,
Groupon reasserted its claim that Appellee had a contract with Groupon and
was, therefore, bound by its terms, including the TOU, regardless of whether
she had read them. Groupon also asserted that Appellee was bound by the
TOU as a third-party beneficiary of the contract between Son and Groupon.
Groupon further claimed that Appellee was estopped from, on the one hand,
relying on the voucher as the sole basis of Groupon’s duty to her while, on
the other hand, denying that Groupon’s TOU applied to her.
On October 28, 2020, the trial court denied Groupon’s Motion for
Reconsideration.
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4According to Appellee, because this web link appeared in a screenshot it
was disabled.
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This appeal followed.5 Groupon raises the following three issues on
appeal, which we have reordered for ease of disposition:
[1.] Whether, even if [Appellee] is not a party to the agreement
and the “deal-terms” referenced in the voucher, and even if she
is not estopped from avoiding them, she is bound as a third-
party beneficiary?
[2.] Whether [Appellee’s] use and acceptance of the voucher
made her a party to the agreement and the “deal-terms”
referenced in the voucher, including the arbitration agreement in
the TOU?
[3.] Whether, even if [Appellee] is not a party to the agreement
and the “deal-terms” referenced in the voucher, she is estopped
from avoiding them?
Groupon’s Brief at 7.
Groupon’s issues challenge the trial court’s order overruling their
preliminary objection to compel arbitration. In such cases, our standard of
review is as follows:
Our review of a claim that the trial court improperly denied
preliminary objections in the nature of a petition to compel
arbitration is limited to determining whether the trial court’s
findings are supported by substantial evidence and whether the
trial court abused its discretion in denying the petition. We
employ a two-part test to determine whether the trial court
should have compelled arbitration: (1) whether a valid
agreement to arbitrate exists, and (2) whether the dispute is
within the scope of the agreement.
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5 The trial court did not order Groupon to file a Pa.R.A.P. 1925(b) Statement
and did not file a Rule 1925(a) Opinion explaining the basis for its decision
to overrule Groupon’s preliminary objections.
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Davis v. Ctr. Mgmt. Grp., LLC, 192 A.3d 173, 180 (Pa. Super. 2018)
(citations, quotation marks, and brackets omitted). See also id. at 182(“[T]he issue of whether a party agreed to arbitrate a dispute is a threshold,
jurisdictional question that must be decided by the [trial] court.”). “Whether
a written contract includes an arbitration agreement and whether the
parties’ dispute is within the scope of the arbitration agreement are
questions of law subject to this Court’s plenary review.” In re Estate of
Atkinson, 231 A.3d 891, 898 (Pa. Super. 2020).
Both Pennsylvania and federal law impose a strong public policy
in favor of enforcing arbitration agreements. Accordingly, if a
valid agreement to arbitrate exists and the dispute falls within
the scope of the arbitration agreement, the dispute must be
submitted to arbitration and the [trial] court’s denial of
arbitration must be reversed.
Id. (citations omitted); see also Davis, 192 A.3d at 183 n.13 (stating that,
“[o]ur Supreme Court [in Taylor v. Extendicare Health Facilities, Inc.,
147 A.3d 490, 509 (Pa. 2016)] has instructed courts to ‘consider questions
of arbitrability with a healthy regard for the federal policy favoring
arbitration’”).
In its first issue, Groupon asserts that Appellee was bound as a third-
party beneficiary of the contract between Groupon and Son to submit her
claims against Groupon to arbitration. Groupon’s Brief at 33-39. We, thus,
review whether a valid arbitration agreement exists between Groupon and
Appellee.
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Generally, only parties to an arbitration agreement are bound by it.
However, this court has recognized that “a nonparty, such as a third-party
beneficiary, may fall within the scope of an arbitration agreement if that is
the parties’ intent.” Pisano v. Extendicare Homes, Inc., 77 A.3d 651,
661 (Pa. Super. 2013) (quoting Elwyn v. Deluca, 48 A.3d 457, 461 (Pa.
Super. 2012).
In Johnson v. Pa. Nat. Ins. Cos., 594 A.2d 296, 298 (Pa. 1991), our
Supreme Court held that a person who was injured while travelling as a
passenger in a taxicab was a third-party beneficiary of the taxicab’s
automobile insurance policy. The passenger was, thus, required to submit
her underinsured motorist claims under the policy to arbitration as the policy
required. Id. at 299 (explaining that “as a third party beneficiary under that
policy, the appellee’s rights are vulnerable to the same limitations which
may be asserted between the promisor and the promisee.”) (citation and
internal quotation marks omitted). The Johnson Court noted that a “third
party beneficiary cannot recover except under the terms and conditions of
the contract from which he makes a claim”. Id. at 298-99. Stated another
way, “[w]hen there is a contract, the right of a beneficiary is subject to any
limitation imposed by the terms of the contract.” Id. at 299 (quoting
Restatement (Second) of Contracts, § 309, cmt. b (1981)).
Instantly, in support of its claim that the trial court erred in refusing to
order this matter to arbitration, Groupon argues that not only did the parties
intend for Appellee to benefit from the agreement between Groupon and
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Son, but also the record demonstrates that Appellee was the only intended
beneficiary of their agreement.6 Groupon’s Brief at 36 (emphasis added).
Accordingly, Groupon argues that Appellee is subject to the same contractual
limitations as Son, including the applicable arbitration provision. Id. at 36-
37.
We are constrained to agree with Groupon. In light of the controlling
case law set forth above, we conclude that Appellee was an intended third-
party beneficiary of the contract between Groupon and Son. As a third-party
beneficiary of the contract, Appellee’s rights were subject to any limitations
imposed by its terms, including the arbitration provision. We conclude,
therefore, that the trial court erred in overruling Groupon’s preliminary
objections to compel the case to arbitration.7, 8
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6 Groupon emphasizes that the voucher expressly identified Appellee as the
recipient of the gift voucher and Son included a note on the voucher
describing it as a “gift” to Appellee. Groupon’s Brief at 36. Groupon further
highlights that Appellee repeatedly admitted in her complaint and response
to Groupon’s preliminary objections that the voucher was a gift to her. Id.
7 In light of our disposition, we need not address Groupon’s remaining
issues.
8 We note that it was not until Appellee filed her brief in this appeal that
Appellee argued that enforcement of the arbitration agreement violates her
constitutional right to a jury trial because she did not affirmatively waive
that right and had no knowledge that she was waiving it. See Appellee’s
Brief at 11-12 (citing Pisano, 77 A.3d at 661-62 (explaining that
“compelling arbitration upon individuals who did not waive their right to a
jury trial would infringe upon wrongful death claimants’ constitutional
rights.”)). Because Appellee did not raise this constitutional claim before the
trial court it is waived. See Pa.R.A.P. 302 (“Issues not raised in the lower
(Footnote Continued Next Page)
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Order reversed. Case remanded for further proceedings. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/25/2022
(Footnote Continued) _______________________
court are waived and cannot be raised for the first time on appeal.). See
also In re Adoption of K.M.G., 219 A.3d 662, 668 (Pa. Super. 2019)
(“[T]he Superior Court cannot address constitutional issues sua sponte.”)
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