Appellant, Richard J. Perr, Esq. ("Perr"), appeals from the December 23, 2020 order sustaining in part and overruling in part his preliminary objections to the complaint of Appellee, Fineman, Krekstein & Harris, P.C. ("FKH"). We affirm in part, reverse in part, and remand.

FKH abandoned its cross appeal from the trial court's order, conceding that an order compelling arbitration is not immediately appealable. Appellee's Brief at 9 n.2.

The trial court set forth the pertinent facts and procedural history in its Pa.R.A.P. 1925(a) opinion:

FKH is a professional corporation engaged in the practice of law. Perr is an attorney and was a former shareholder and employee of FKH. On June 25, 2015, Perr entered into a written [E]mployment [A]greement [(the "Employment Agreement")] with FKH pursuant to which Perr was a "full-time attorney" in the private practice of law for FKH. Pursuant to the Employment Agreement, Perr agreed to devote sufficient time, energy, skill and

best efforts to the performance of his duties to further the business interests of FKH. The Employment Agreement does not contain an arbitration provision.

Perr became a shareholder and director of FKH in 2015 and entered into a Shareholder Agreement [(the "Shareholder Agreement")] with FKH and FKH shareholders S. David Fineman, Esquire and Gary A. Krimstock, Esquire which was amended and restated on November 1, 2017. The amended and restated Shareholder Agreement contained the following provisions:

8.2. Deadlock. In the event of a material disagreement among the Shareholders and/or the Corporation with respect to this Agreement or the conduct of the affairs of the Corporation (the "Deadlock"), the Shareholders hereby agree to submit the Deadlock to mediation in Philadelphia, Pennsylvania, either through a mutually acceptable mediator or through an established mediation service, within fifteen business days from the date [of] the Deadlock (the "Mediation").

8.3. Arbitration. In the case that the mediation has been unsuccessful, the Shareholders and the Corporation agree to settle the Deadlock by binding arbitration in accordance with this Agreement. Any claim or controversy arising out of or relating to this Agreement or any breach thereof shall be settled by such arbitration ….

[Shareholder Agreement, at §§ 8.2 and 8.3 (hereinafter "the Arbitration Clause") (the November 1, 2017 Shareholder Agreement appears in the certified record at Exhibit A to Appellant's petition to compel arbitration; the language of §§ 8.2 and 8.3 remained unchanged through various amendments of the Shareholder Agreement).]

On December 4, 2019, Perr gave notice orally that he was leaving FKH on December 31, 2019. A meeting of the compensation committee of FKH was then convened but Perr decided not to participate. The compensation committee of FKH decided that Perr's compensation would end on December 14, 2019. On February 12, 2020, Perr made demand for return of his capital of $25,000. FKH rejected Perr's demand and insisted that Perr surrender his stock interest in FKH and submit a written

resignation. On February 14, 2020, Perr submitted a written resignation, withdrawal and transfer of stock ownership interest to FKH.

After Perr's employment and shareholder interest in FKH terminated, FKH discovered that Perr had been serving as Chief Compliance Officer of LucentPay at the same time as his employment with FKH and that LucentPay was holding Perr out as its Chief Compliance Officer, co-founder, and employee. LucentPay, a client of FKH, provided Perr with a 16% ownership equity interest in its company. In exchange for the 16% ownership interest, Perr, along with an associate attorney at FKH at Perr's request, provided LucentPay legal guidance and legal services all unbilled while employed at FKH. At no time did LucentPay pay for the legal services rendered by Perr and FKH's associate attorney. Perr never disclosed to FKH that he had a 16% interest in LucentPay or that in exchange for his 16% interest he undertook to provide free legal guidance to LucentPay while employed at FKH. On March 30, 2020, FKH made demand that Perr produce documentation to account for and reveal his interest and compensation from LucentPay. Perr refused to comply. On April 2, 2020, FKH initiated this action by writ of summon[s] against Perr and on July 23, 2020, FKH filed a complaint alleging claims of breach of fiduciary duty (count I), fraud and fraudulent misrepresentation (count II), conversion (count III), theft of corporate opportunity (count IV), unjust enrichment (count V), for an accounting (count VI), for imposition of a constructive trust (count VII), and breach of employment agreement (count VIII).

On July 13, 2020, Perr filed a petition to compel arbitration. On August 12, 2020, Perr filed preliminary objections pursuant to Pa.R.C.P. [No.] 1028(a)(6) agreement for alternative dispute resolution. FKH filed responses to the petition to compel arbitration and preliminary objections and on December 3, 2020, this court sustained in part and overruled in part the preliminary objections and granted in part and denied in part the petition to compel arbitration. The court held that any and all claims under the Shareholder Agreement were remanded to arbitration and that all claims under the Employment Agreement were not subject to arbitration. Additionally, the court stayed the claims subject to arbitration pending resolution of the non-arbitral claims. On January 12, 2021, Perr filed a notice of appeal of this court's order.

Trial Court Opinion, 4/26/21, at 1-4 (footnotes omitted).

Perr claims the trial court erred in concluding that FKH's claim against him for breach of the Employment Agreement was not covered under the Arbitration Clause. He also claims the trial court erred in staying the arbitrable claims rather than the claims proceeding in court. We consider these issues in turn.

An order denying a petition to compel arbitration is an interlocutory order appealable as of right.

Rule 311(a)(8) permits an interlocutory appeal as of right where the order is made appealable by statute. Pa.R.A.P. 311(a)(8). Section 7320(a)(1) provides that an appeal may be taken from an order denying an application to appeal arbitration. 42 Pa.C.S.A. § 7320(a)(1).

Our standard of review of a claim that the trial court improperly overruled preliminary objections in the nature of a petition to compel arbitration is clear. Our review 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.

In doing so, we employ a two-part test to determine whether the trial court should have compelled arbitration. First, we examine whether a valid agreement to arbitrate exists. Second, we must determine whether the dispute is within the scope of the agreement.

Whether a claim is within the scope of an arbitration provision is a matter of contract, and as with all questions of law, our review of the trial court's conclusion is plenary.

MacPherson v. Magee Mem'l Hosp. for Convalescence, 128 A.3d 1209, 1218-19 (Pa. Super. 2015) (en banc) (internal citations and quotation marks omitted).

Further, we are guided by the following principles:

(1) arbitration agreements are to be strictly construed and not extended by implication; and (2) when parties have agreed to arbitrate in a clear and unmistakable manner, every reasonable effort should be made to favor the agreement unless it may be said with positive assurance that the arbitration clause involved is not susceptible to an interpretation that covers the asserted dispute.

Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1273 (Pa. Super. 2004).

The parties do not dispute the validity of the Arbitration Clause. The question is whether it is broad enough in scope to encompass disputes under the Employment Agreement as well as the Shareholder Agreement. Our review of the two agreements reveals that they are expressly interrelated in some respects. The Employment Agreement provided for Perr to serve FKH as a "full-time attorney" and "shareholder." Employment Agreement, 6/24/2015, at ¶ 2(a), (b). Likewise, the Employment Agreement provided for its termination upon, among other contingencies, "attaining the age set forth in § 5.2 of the Shareholders Agreement." Id. at ¶ 3(d). Discharge for cause under the Employment Agreement occurs upon a vote of shareholders "as defined in the Shareholders Agreement." Id. at ¶ 8. The Employment Agreement contains an integration clause providing that it constitutes the entire agreement among the parties. Id. at ¶ 11(g). The integration clause does not reference the Shareholder Agreement. Id.

The Employment Agreement appears in the record as Exhibit C to FKH's complaint.

The Shareholder Agreement, for its part, refers to the Employment Agreement as "separate." For example, the Shareholder Agreement provides that "each Shareholder shall enter into and execute a separate Employment Agreement which shall be consistent with this Agreement." Shareholder Agreement, 11/1/17, at ¶ 5.1. The Shareholder Agreement's integration clause references the Employment Agreement: "This Agreement and the separate Employment Agreements referenced herein constitute the entire understanding and agreement of the parties with respect to the subject matter hereof […]." Id. at ¶ 8.5. The record contains several amended versions of the Shareholder Agreement, but it appears that Perr became a Shareholder and Employee of FKH on the same day, June 24, 2015. Shareholder Agreement, 6/24/15. Thus, Perr was both a shareholder and an employee for the entirety of his tenure at FKH.

This version of the Shareholder Agreement appears in the record as Exhibit E to FKH's complaint.

We now turn to the complaint, in which one of FKH's causes of action is titled "Breach of Employment Agreement." We are mindful that "a complaint's substance, not its styling, is to control whether the complainant party must proceed to arbitration or may file in the court of common pleas." Warwick Twp. Water and Sewer Auth. v. Boucher & James, Inc., 851 A.2d 953, 957 (Pa. Super. 2004) (quoting Shadduck v. Christopher J. Kaclik, Inc., 713 A.2d 635 (Pa. Super. 1998)), appeal denied, 879 A.2d 783 (Pa. 2005).

The complaint occasionally references Perr as an "employee and shareholder" and/or a "shareholder-employee." Complaint, 7/23/20, at ¶¶ 2, 3, 12, 14, 31, 112-117. In several instances, however, the Complaint references Perr only as an employee:

15. Under the LucentPay Operating Agreement, section 2.7, and at a time when Perr was an employee of FKH devoted to the full-time practice of law for FKH, Perr obligated himself to (a) utilize reasonable efforts to increase the client base of LucentPay, and (b) assist with the operations of LucentPay where necessary.

16. Under the LucentPay Operating Agreement, section 2.7, and at a time when Perr was an employee of FKH devoted to the full-time practice of law for FKH, Perr further obligated himself to 'provide legal guidance for the Company [LucentPay] in connection with compliance and related issues, and provide a legal opinion as to the initial business of the Company.'

[…]

36. On or about June 24, 2015, Perr entered into a written Employment Agreement with FKH (the "Employment Agreement"" pursuant to which Perr was employed as a "full-time attorney" of FKH. […]

37. Pursuant to the Employment Agreement, Perr was engaged as a "full-time attorney in the private practice of law," and Perr agreed that he "shall devote sufficient working time, energy, skill and best efforts to the performance of the Employee's [Perr's] duties hereunder in order to diligently further the business and interests of the Company [FKH]."

38. As a full-time employee of FKH devoted to use his best efforts in order to diligently further the business and interests of FKH, Perr was not permitted to work in a separate position providing legal guidance to LucentPay.

39. The Employment Agreement contains no clause mandating or requiring that the parties participate in any mediation of disputes under the Employment Agreement.

40. The Employment Agreement contains no clause mandating or requiring that the parties participate in any arbitration of disputes under the Employment Agreement.

Id. at ¶¶ 15-16, 36-40. Similarly, the Complaint alleges that the Shareholder Agreement does not mandate arbitration of disputes arising under the Employment Agreement. Id. at ¶¶ 46-48.

The count for breach of the Employment Agreement includes a demand for Perr to return all salary and compensation he received from FKH while he was also an officer and employee of LucentPay. Id. at ¶¶ 150-51. This item of damages is not included in any other count. In summary, the complaint alleges that Perr's employment with LucentPay violated his obligation under the Employment Agreement to "devote sufficient working time, energy, skill and best efforts to the performance of the Employee's duties hereunder in order to diligently further the business and interests of the Company." Id. at ¶ 37 (quoting Employment Agreement at ¶ 2(b)). The Shareholder

We observe that paragraph four of the Employment Agreement governed Perr's compensation as an employee of FKH, and ¶ 5 governed his benefits. Employment Agreement, 6/24/2015, at ¶¶ 4-5. Similarly, paragraph 6 of the Shareholder Agreement governs compensation of FKH shareholders. Shareholder Agreement at ¶ 6. The Shareholder Agreement contains no provision governing benefits.

Agreement contains no analogous provision to ¶ 2(b) of the Employment Agreement.

The trial court found that the Arbitration Agreement was not broad enough in scope to encompass the breach of Employment Agreement claims:

The complaint also alleges a claim for breach of the Employment Agreement. The Employment Agreement does not contain an arbitration provision. The question then became whether the arbitration provision set forth in § 8.3 of the Shareholder Agreement applies to the Employment Agreement. The court found that it did not apply. The Employment Agreement is a separate agreement which constitutes the entire agreement between the parties. While the Employment Agreement does reference the Shareholder Agreement, the references are limited and specific to the term of employment and discharge, not arbitration. Since the Employment Agreement did not reference § 8.3 of the Shareholder Agreement, as it did with respect to term of employment and discharge, and since agreements to arbitrate are to be strictly construed and not extended by implication, the court found that § 8.3 did not apply to the claim for breach of the Employment Agreement or any related tort claims alleged in the complaint. As such, the court severed the arbitral claims from the non-arbitral claims and stayed the arbitral claims pending resolution of the non-arbitral claims.

Trial Court Opinion, 4/26/21, at 5-6 (footnotes omitted).

Despite the interrelatedness of the two agreements discussed above, we discern no error in the trial court's decision as to the scope of the arbitration clause. The breach of Employment Agreement cause of action alleges the breach of an obligation arising expressly under that agreement, and only under that agreement. Because arbitration clauses are to be strictly construed, the Employment Agreement contains no arbitration clause, and FKH's claim for its breach relates to a clause that has no analogue in the Shareholder Agreement, we cannot conclude the parties have clearly and unmistakably agreed to submit this claim to arbitration. We therefore have no basis for disturbing this portion of the trial court's order.

Next, we must determine whether the trial court erred in denying Perr's petition to compel arbitration insofar as the court permitted the breach of Employment Agreement action to proceed in court while ordering a stay of the arbitrable claims. To decide this question, we must construe § 7304 of the Judicial Code. Most pertinent instantly is subsection (d):

In Sew Clean Drycleaners and Launders, Inc. v. Dress For Success Cleaners, Inc., 903 A.3d 1254, 1257-58 (Pa. Super. 2006), this Court held that an order declining to stay a court action, thus permitting it to proceed concurrently with the arbitration, is an appealable collateral order pursuant to Pa.R.A.P. 313. Here, because the trial court found most of Perr's claims to be arbitrable but did not compel immediate arbitration, we have concluded this matter is appealable pursuant to Appellate Rule 311(a)(8) and § 7320(a)(1) of the Judicial Code, as explained above.

The Statutory Construction Act provides: "The object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly. Every statute shall be construed, if possible, to give effect to all its provisions." 1 Pa.C.S.A. § 1921(a). Further, "[w]hen the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." 1 Pa.C.S.A. § 1921(b). As explained in the main text, we find no ambiguity in § 7304(d).

Subsection (a) provides for an order compelling arbitration if the arbitrability of the matter is in dispute and if the trial court finds in favor of the party moving to compel arbitration. 42 Pa.C.S.A. § 7304(a). Subsection (b) provides for a stay of arbitration where the opposing party can establish there is no agreement to arbitrate; otherwise "the court shall order the parties to proceed with arbitration." 42 Pa.C.S.A. § 7304(b). Subsection (c) governs venue of motions to compel or stay arbitration, and subsection (e) provides that the court deciding arbitrability shall not base its decision on the perceived merits of the underlying controversy. 42 Pa.C.S.A. § 7304(c), (e).

(d) Stay of judicial proceedings.--An action or proceeding, allegedly involving an issue subject to arbitration, shall be stayed if a court order to proceed with arbitration has been made or an application for such an order has been made under this section. If the issue allegedly subject to arbitration is severable, the stay of the court action or proceeding may be made with respect to the severable issue only. If the application for an

order to proceed with arbitration is made in such action or proceeding and is granted, the court order to proceed with arbitration shall include a stay of the action or proceeding.

42 Pa.C.S.A. § 7304(d). The first sentence of § 7304(d) mandates a stay of a judicial action or proceeding where, as here, an order to proceed with arbitration has been applied for or entered. Where the arbitrable issue is severable, the second sentence permits the stay of the court proceeding to be limited to the arbitrable issue. In other words, the court action on the non-arbitrable issues may proceed concurrently with the arbitration where the arbitrable and non-arbitrable issues are severable. The third sentence requires an order granting an application to proceed with arbitration to include a stay of the judicial action on the arbitrable issues.

The statute does not authorize a stay of arbitration pending the outcome of a court action on severable, non-arbitrable issues. That is, nothing in the statute authorizes what the trial court did here. FKH relies on § 323 of the Judicial Code in support of the trial court's broad authority to manage the cases before it. FKH cites In re Estate of Petro, 694 A.2d 627, 631-32 (Pa. Super. 1997), appeal denied, 706 A.2d 1213 (Pa. 1997), wherein this Court wrote that the power of granting a stay is one of the powers necessary to the fair and efficient administration of justice. While we do not dispute these general principles, FKH has cited no authority governing their application in a case involving § 7304. Section 7304(d) governs the efficient administration of justice in cases involving an agreement to arbitrate. In other words, § 7304 is very specific, whereas § 323 is general, as is the holding in Petro. The Rules of Statutory Construction provide clear guidance in this situation:

As noted above, § 7304(b) authorizes a stay of arbitration only where the opponent of arbitration establishes that no agreement to arbitrate exists. 42 Pa.C.S.A. § 7304(b); see Vertical Res., Inc. v. Bramlett. 837 A.2d 1193, 1203 (Pa. Super. 2003) (explaining that a party is entitled to enjoin arbitration where there was no agreement to arbitrate or where the dispute falls outside the scope of the agreement).

Section 323, titled "Powers," provides:

Every court shall have power to issue, under its judicial seal, every lawful writ and process necessary or suitable for the exercise of its jurisdiction and for the enforcement of any order which it may make and all legal and equitable powers required for or incidental to the exercise of its jurisdiction, and, except as otherwise prescribed by general rules, every court shall have power to make such rules and orders of court as the interest of justice or the business of the court may require.

42 Pa.C.S.A. § 323.

Whenever a general provision in a statute shall be in conflict with a special provision in the same or another statute, the two shall be construed, if possible, so that effect may be given to both. If the conflict between the two provisions is irreconcilable, the special provisions shall prevail and shall be construed as an exception to the general provision, unless the general provision shall be enacted later and it shall be the manifest intention of the General Assembly that such general provision shall prevail.

1 Pa.C.S.A. § 1933. We find no direct conflict between § 323 and § 7304, the former of which does not expressly mention the power to grant a stay, much less a stay of a court action pending arbitration. Section 7304(d) clearly governs the power to grant a stay in a case involving an agreement to arbitrate.

Further, the Courts of this Commonwealth have cited § 7304(d) in support of a stay of the judicial proceeding. Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490, 510 n. 29 (Pa. 2016) ("[O]nce an issue has been referred to arbitration, any judicial proceeding involving that issue is stayed pending the outcome of arbitration."). Sew Clean, 903 A.3d at 1258 ("Clearly, Sew Clean's claims against Giant Eagle relate to the issues that are subject to arbitration, and thus, the trial court should have issued a stay pursuant to 42 Pa.C.S. § 7304(d)"). Given the clear language of § 7304(d), and finding FKH's arguments to the contrary unpersuasive, we find no precedential or statutory authority for the trial court's decision to stay the arbitration claims.

At most, as we explained above, the arbitrable claims and the breach of Employment Agreement claim can proceed concurrently if they are severable. Trial courts have broad discretion to sever or combine cases or causes of action under Pa.R.C.P. No. 213. Pa.R.C.P. No. 213(b); Ball v. Bayard Pump & Tank Co., 67 A.3d 759, 767 (Pa. 2013). In this case, the second sentence of § 7304(d) would permit the breach of Employment Agreement cause of action to proceed in court while the court proceeding on the remaining causes of action is stayed pending their arbitration so long as the arbitrable claims are severable. If the arbitrable claims and the breach of Employment Agreement claim are not severable, § 7304(d) requires a stay of the judicial proceeding.

On remand, the trial court should consider the applicability to this case of Sew Clean and Taylor. In Sew Clean, the plaintiff (Sew Clean) sued Dress For Success (DFS) and Giant Eagle for damages arising out of an alleged breach of its agreement with DFS. DFS operated dry cleaning kiosks at Giant Eagle grocery stores and contracted with Sew Clean to launder the clothes DFS collected at the kiosks. DFS and Giant Eagle moved to compel arbitration and to stay the judicial proceeding against Giant Eagle, which was not a party to the agreement between Sew Clean and DFS. The trial court compelled arbitration but did not stay the action against Giant Eagle. This Court reversed, holding that Sew Clean's claims against Giant Eagle "relate to the issues that are subject to arbitration, and thus, the trial court should have issued a stay pursuant to 42 Pa.C.S. § 7304(d)." Id. at 1258.

Likewise, as noted above, our Supreme Court in Taylor wrote in a footnote that where an issue is referred to arbitration, any judicial proceeding involving that issue is stayed pending the outcome of arbitration. Taylor, 147 A.3d at 510 n. 29. The Taylor Court explained that the arbitration of the survival action in that case would be resolved before the wrongful death action could proceed in court. Id. Thus, in a case involving distinct causes of action arising out of a common nucleus of facts, the Supreme Court wrote that the action pending in court would await the outcome of arbitration.

Instantly, because the trial court misapplied § 7304(d), we must remand for a determination of severability under the proper statutory framework. The trial court, mindful that the arbitrable claims must proceed immediately, must determine whether the cause of action under the Employment Agreement are severable. If so, the court action on those causes of action may proceed concurrently with the arbitration of the claims under the Shareholder Agreement. If not, the court action on the Employment Agreement must await the outcome of the arbitration.

As noted above, this decision rests within the discretion of the trial court under Pa.R.C.P. No. 213(b).

In summary, we affirm the trial court's order insofar as it denied Perr's application to compel arbitration of the breach of Employment Agreement cause of action. We reverse the order insofar as it stayed the arbitrable claims pending the outcome of the court action on the breach of Employment Agreement claim. Rather, the court must compel immediate arbitration of the arbitrable claims, stay the judicial action as to the arbitrable claims, decide whether the cause of action on the breach of Employment Agreement claim is severable from the arbitration claims, and proceed as explained above upon making a severability determination. We remand for further proceedings consistent with this Opinion.

Order affirmed in part and reversed in part. Case remanded. Jurisdiction relinquished.

Judge McCaffery joins the opinion.

Judge Bowes files a concurring and dissenting opinion.

Judgment Entered.

CONCURRING AND DISSENTING

BOWES, J.

I agree with my esteemed colleagues in most respects. Specifically, I agree that the trial court properly determined that the claim of Fineman, Krekstein & Harris, P.C. ("FKH") against Attorney Richard Perr for breach of the Employment Agreement is not covered by the Arbitration Clause, and that the trial court erred in its application of 42 Pa.C.S. § 7304(d) by failing to stay the judicial proceedings on the arbitrable claims.

My disagreement concerns the Majority's discussion of the severance and severability of the non-arbitrable claims. The Majority rules that the issues of (1) whether the claims are able to be severed, and (2) whether it is appropriate to sever them, are both placed within the discretion of the trial court. See Majority Opinion at 15. I believe that the Majority conflates distinct questions which are subject to different standards of appellate review. In my view, whether claims are severable for purposes of § 7304(d) is a question of law, not a matter subject to abuse-of-discretion review. It is the question of whether claims that are severable should be severed that is within the trial court's sound discretion.

Black's Law Dictionary defines "severability" by referring to "separability," which means "[t]he capability of a thing's being divided or severed from another." SEPARABILITY, Black's Law Dictionary (11th ed. 2019). Severability is routinely acknowledged to be a question of law in other contexts. See, e.g., Commonwealth v. Hopkins, 117 A.3d 247, 255 (Pa. 2015) (severability of unconstitutional statutory provision is a question of law); Jacobs v. CNG Transmission Corp., 772 A.2d 445, 450 (Pa. 2001) (same as to severability of contract); Winthrop & Co., Inc. v. Milgrom, 668 A.2d 557, 560 (Pa.Super. 1995) (same as to severability of claims for compensation based upon sale of business assets and transfer of related realty).

In considering the meaning of the term as used in § 7304(d), I begin by noting that, as there is a dearth of Pennsylvania case law on this aspect of our version of the Uniform Arbitration Act ("UAA"), we must consider the decisions of other states which have adopted the UAA. I believe that a review of these decisions indicates that non-arbitrable claims that involve the same issues and facts as arbitrable claims are not severable.

Chapter 73 of our Judicial Code "shall be known and may be cited as the 'Uniform Arbitration Act.'" 42 Pa.C.S. § 7301. The statute at issue, 42 Pa.C.S. § 7304, is in all respects material to the issue before us identical to Uniform Arbitration Act, § 2. See Unif. Arbitration Act of 1956 § 2(d) ("Any action or proceeding involving an issue subject to arbitration shall be stayed if an order for arbitration or an application therefor has been made under this section or, if the issue is severable, the stay may be with respect thereto only. When the application is made in such action or proceeding, the order for arbitration shall include such stay."). Accordingly, we "must consider the decisions of our sister states who have adopted and interpreted such uniform law and must afford these decisions great deference." Sternlicht v. Sternlicht, 876 A.2d 904, 911 n.13 (Pa. 2005); 1 Pa.C.S. § 1927 ("Statutes uniform with those of other states shall be interpreted and construed to effect their general purpose to make uniform the laws of those states which enact them."). Additionally, I consider decisions of jurisdictions which have otherwise adopted provisions comparable to § 7304(d), such as New York.

The Florida court's determination in Post Tensioned Eng'g Corp. v. Fairways Plaza Associates, 429 So.2d 1212, 1214 (Fla.Dist.Ct.App. 1983), is particularly illustrative. In that case, Fairways Plaza ("Fairways"), which contracted to build multiple office buildings, sued the design engineer, the general contractor ("Commercial"), and several of Commercial's subcontractors. The only one of the involved contracts that had an arbitration clause was the one between Fairways and Commercial. While Fairways' claims against Commercial were therefore stayed pending arbitration, the trial court declined to stay the judicial proceedings concerning Fairways' claims against the other defendants. Commercial appealed, contending that Florida's statute comparable to our § 7403 required a stay of all judicial proceedings.

Florida statute in effect at the time provided, in pertinent part: "Any action or proceeding involving an issue subject to arbitration under this law shall be stayed if an order for arbitration or an application therefor has been made under this section or, if the issue is severable, the stay may be with respect thereto only." Post Tensioned Eng'g Corp. v. Fairways Plaza Associates, 429 So.2d 1212, 1214 (Fla.Dist.Ct.App. 1983) (quoting Fla.Stat.Ann. § 682.03 (1981)). The current version is not different on this issue, providing as follows: "If the court orders arbitration, the court on just terms shall stay any judicial proceeding that involves a claim subject to the arbitration. If a claim subject to the arbitration is severable, the court may limit the stay to that claim." Fla.Stat.Ann. § 682.03(7).

The appellate court agreed with Commercial as to the claims involving the same issues as the arbitrable claims, explaining that those claims were not severable:

The "issue subject to arbitration" between Fairways and Commercial is whether the building defects, assuming they exist, are the result of shoddy workmanship on the part of Commercial or its subcontractors, that is, a failure to adhere to the design engineer's plans and specifications. Because Commercial, under the doctrine of respondeat superior, is responsible for the negligence of its subcontractors, a determination in arbitration that Commercial was not negligent would necessarily be a determination that Commercial's subcontractors were not negligent. Under such a determination any need for litigation between Fairways and Commercial's subcontractors would be obviated. Therefore, we think it clear that Fairways' action against Commercial's subcontractors does involve "an issue subject to arbitration" and must be stayed.

Id. at 1214.

However, the court determined that Fairways' claims against the design engineer were severable:

The issue between them is whether the plans and specifications for the building project were properly designed. No matter how the issue in arbitration between Fairways and Commercial is resolved, its resolution has no effect upon the issue between Fairways and the design engineer. Thus, the arbitrable issue, although not severable from the issue in the action against Commercial's subcontractors, is severable from the issue in the action against the design engineer. Since Section 682.03(3) expressly provides that "if the issue is severable, the stay may be with respect thereto only," no stay was required of the litigation between Fairways and the design engineer.

Id. at 1215.

These principles were also demonstrated in Weiss v. Nath, 949 N.Y.S.2d 81 (N.Y.App.Div. 2012). In that case, the beneficiary of an account established by Rafael Weiss ("Rafael") pursuant to the Uniform Gifts to Minors Act ("UGMA") sued Ilona Nath ("Nath") along with Merrill Lynch and several of its employees concerning the removal of funds from the UGMA account. Nath asserted counterclaims against the plaintiff and added Rafael as a defendant. The trial court granted Merrill Lynch's motion to compel arbitration and stayed all claims. Nath unsuccessfully sought to have severed "the non[-]arbitrable causes of action, counterclaims, and third-party causes of action asserted by her, and asserted against her by the plaintiff and [Rafael]" and to allow those claims to proceed. Id. at 83.

The appellate court explained the applicable law as follows:

Where arbitrable and non[-]arbitrable claims are inextricably interwoven, the proper course is to stay judicial proceedings pending completion of the arbitration, particularly where the determination of issues in arbitration may well dispose of non[-]arbitrable matters. However, courts have the power to sever arbitrable causes of action from non[-]arbitrable causes of

action where judicial economy would not be served by their consolidation, and where there is no danger of inconsistent rulings by the arbitrator and the court, or where there is no potential that the determination of the arbitrable causes of action would dispose of or significantly limit the issues involved in the non[-]arbitrable causes of action.

Id. at 84 (cleaned up).

Applying these principles, the court concluded that "the causes of action asserted by the plaintiff against Nath, the counterclaims asserted by Nath against the plaintiff, and certain of the third-party causes of action asserted by Nath against Rafael directly concern the creation and management of the UGMA account, and are, therefore, inextricably interwoven with the arbitrable causes of action." Id. Accordingly, those non-arbitrable claims "were properly stayed pending the completion of arbitration." Id. However, the remaining non[-]arbitrable claims were "unrelated to any of the arbitrable claims." Id. "Since the arbitration [would] not dispose of or significantly limit the issues with respect to those third-party causes of action, or pose a risk of inconsistent rulings by the arbitrator and the court," those non-arbitrable claims were severable. Id.

The Texas court's decision in In re Houston Progressive Radiology Associates, PLLC, 474 S.W.3d 435, 450 (Tex. App. 2015), also demonstrates that inextricably intertwined non-arbitrable claims may not be severed and allowed to proceed before the arbitration is resolved. In that case, "[t]wo professional associations, former members of a medical practice, sued the practice and two doctors associated with it, alleging breaches of contract, breach of fiduciary duty, and fraud in connection with the sale of the practice." Id. at 439. "Another doctor employed by the practice[, Dr. Michael Nguyen,] also sued for breach of his employment agreement." Id. Some of the claims among the practices and member doctors were alleged to be subject to an arbitration agreement, but Dr. Nguyen's employment agreement contained no arbitration agreement. The trial court denied the request to compel arbitration.

The appeals court concluded that the trial court erred in failing to hold that the first group of claims was subject to an arbitration agreement and to compel arbitration. It then considered whether Dr. Nguyen's non-arbitrable claims should be stayed pending the arbitration. Under Texas law, "the trial court shall stay a proceeding that involves an issue subject to arbitration if an order for arbitration or an application for that order is made under this subchapter." Id. at 449 (quoting Tex. Civ. Prac. & Rem. Code Ann. § 171.025(a)) (cleaned up). However, "the stay applies only to the issue subject to arbitration if that issue is severable from the remainder of the proceeding." Id. at 450 (citing Tex. Civ. Prac. & Rem. Code Ann. § 171.025(b)) (cleaned up). The court then indicated that a non-arbitrable claim is severable if: "(1) the controversy involves more than one cause of action, (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted, and (3) the severed claim is not so interwoven with the remaining action that they involve the same facts and issues." Id.

The court examined the allegations in Dr. Nguyen pleading and observed that his "claims and requests for relief ar[o]se from the same facts and [we]re inherently inseparable from" the arbitrable claims. Id. It further noted that the litigation of Dr. Nguyen's claims would have "a critical impact on the arbitration" and indeed could "subvert the defendants' right to a meaningful arbitration . . . by deciding issues subject to the arbitration." Id. Since the non-arbitrable claims were inseparable from the arbitrable claims, in that they "involve[d] the same operative facts" and thus "threaten[ed] to jeopardize the integrity of the parallel arbitration," the non-arbitrable claims were required to be stayed pending the arbitration. Id. at 451. See also Kelso-Burnett Co. v. Zeus Dev. Corp., 437 N.E.2d 26, 31-32 (Ill.App.Ct. 1982) (holding non-arbitrable claim was not severable because it might "be obviated by the outcome of the arbitration," and thus the stay "further[ed] the policy which favors the resolution of disputes outside the judicial forum").

These cases from other jurisdictions thus demonstrate that the severability of arbitrable and non-arbitrable claims under § 7304(d) is a question of law that turns on how much overlap there is of the issues and facts. The two Pennsylvania appellate decisions addressing the stay of non-arbitrable claims, while not addressing the issue as one of severability, nonetheless applied the principles gleaned from the above cases and opined as a matter of law on the basis of the interrelatedness of the arbitrable and non-arbitrable claims.

In Sew Clean Drycleaners & Launders, Inc. v. Dress for Success Cleaners, Inc., 903 A.2d 1254, 1258 (Pa.Super. 2006), Sew Clean had a contractual relationship with Dress for Success ("DFS") whereby Sew Clean would perform the dry cleaning services for garments that DFS collected at kiosks in Giant Eagle grocery stores. The contract between Sew Clean and DFS included an agreement to arbitrate, however Giant Eagle was not party to that agreement. DFS terminated the agreement with Sew Clean when damage to Sew Clean's equipment temporarily left it unable to perform. Sew Clean sued DFS for contract claims and Giant Eagle for torts related to its alleged interference with the contract. Specifically, Sew Clean alleged that Giant Eagle "(1) caused DFS Cleaners to breach the license agreement; (2) aided and abetted DFS Cleaners in making . . . fraudulent misrepresentations by encouraging DFS Cleaners to terminate the agreement in bad faith; and (3) aided and abetted DFS Cleaners in breaching its fiduciary duty to Sew Clean by encouraging DFS Cleaners to terminate the agreement in bad faith." Id. at 1256-57 (Pa.Super. 2006).

The trial court stayed Sew Clean's claims against DFS after granting DFS's petition to compel arbitration, but refused to stay the judicial proceedings against Giant Eagle that were not subject to arbitration. On Giant Eagle's appeal, this Court held that a stay of the claims against Giant Eagle should have been granted. In determining whether the order denying the stay was appealable as a collateral order, we observed that "[§] 7304(d) embodies a legislative policy to avoid duplicative litigation with the possibility of irreconcilable results in every instance where a separate action involves an issue that is subject to arbitration." Id. at 1258 (cleaned up, emphasis in original). After concluding that we had jurisdiction over the interlocutory appeal, we, without further discussion, held as follows: "Clearly, Sew Clean's claims against Giant Eagle relate to the issues that are subject to arbitration, and thus, the trial court should have issued a stay pursuant to 42 Pa.C.S. § 7304(d)." Id. at 1258.

Pursuant to existing precedent, an arbitration award is considered a final judgment on the merits of the issues arbitrated for purposes of res judicata and collateral estoppel. See Dyer v. Travelers, 572 A.2d 762, 764 (Pa.Super. 1990). Our Supreme Court has, in dicta, questioned the wisdom of granting preclusive effect to arbitration. See Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490, 511-12 (Pa. 2016) (stating "the preclusive effect of an arbitration award upon judicial proceedings is not presently before this Court," and acknowledging that present appellate decisions hold that collateral estoppel does apply, but suggesting that the issue is arbitrable fact-finding may not be entitled to the same preclusive effect as judicial fact-finding). Unless and until the existing precedent is overruled, it is binding upon this Court and the trial courts.

Thus, even though the claims against Giant Eagle sounded in tort rather than contract, this Court reversed the trial court's decision to allow the judicial proceedings to occur contemporaneously with the arbitration because they related to the issues in the arbitration. For example, an arbitration ruling that DFS did not breach its agreement with Sew Clean, or that it made no fraudulent misrepresentations, clearly would impact the non-arbitrable claims that Giant Eagle aided and abetted DFS in committing those acts. Importantly, our holding was not presented as an abuse of discretion by the trial court, but a conclusion reached as a matter of law based upon the relatedness of the arbitrable and non-arbitrable claims.

Thereafter, in Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490 (Pa. 2016), the main issue was whether survival and wrongful death claims should be tried together in court when the survival claim implicated an arbitration agreement, but the wrongful death claim was not subject to arbitration. The trial court, applying Pa.R.C.P. 213(e), refused to sever the causes of action and compel arbitration of the arbitrable survival claim. Our Supreme Court concluded that Rule 213(e) was preempted by federal law and remanded to the trial court to decide whether there was in fact a valid agreement to arbitrate the survival claims. Given the unresolved issue of whether there was an enforceable agreement to arbitrate any of the claims, the Court did not have cause to rule on severability for purposes of § 7304. However, the Court, citing § 7304(d), stated as follows in a footnote:

"A cause of action for the wrongful death of a decedent and a cause of action for the injuries of the decedent which survives his or her death may be enforced in one action, but if independent actions are commenced they shall be consolidated for trial." Pa.R.C.P. 213(e).

once an issue has been referred to arbitration, any judicial proceeding involving that issue is stayed pending the outcome of arbitration. Therefore, the survival claim arbitration will be resolved before the wrongful death action can proceed in the court

of common pleas. Thus, the court hearing the wrongful death action may account for any damages awarded in the survival arbitration and "avoid duplicate recovery[.]"

Id. at 510 n.29 (citation omitted). From this it appears that, although survival actions and wrongful death actions have different parties and mostly different damage elements, our Supreme Court envisioned that one would without question be stayed pursuant to § 7304(d) if the agreement to arbitrate the other was enforceable.

Thus, the language of § 7304(d) and the Pennsylvania decisions touching on the subject are consistent with the above-discussed authority from other jurisdictions concerning the legal severability of claims. Applying this authority to the case sub judice, I believe that the Majority errs in remanding for the trial court to exercise discretion as to whether the claims are severable and should be severed. Instead, I would hold that the arbitrable and non-arbitrable claims are not severable as a matter of law because all of FKH's causes of action are based upon the same allegations of misconduct by Perr, namely his decision to accept employment at LucentPay while he was being compensated as a fiduciary and employee of FKH. Allowing both the arbitrable and non-arbitrable claims to proceed simultaneously would involve the duplication of efforts and the risk of inconsistent results. This is not akin to the cases discussed above in which there existed non-arbitrable claims unrelated to the claims being sent to arbitration. See, e.g., Post Tensioned, supra at 1214-15 (staying both arbitrable claim that general contractor failed to follow design specifications and non-severable, non-arbitrable respondeat superior claims against subcontractors, but allowing to proceed severable claims against design engineer that building design itself was faulty).

My view of the authority is also consistent with Pa.R.C.P. 213's generally-applicable provision governing the severance of claims. That rule provides, in relevant part: "The court, in furtherance of convenience or to avoid prejudice, may, on its own motion or on motion of any party, order a separate trial of any cause of action, claim, or counterclaim, set-off, or cross-suit, or of any separate issue, or of any number of causes of action, claims, counterclaims, set-offs, cross-suits, or issues." Pa.R.C.P. 213(b) (emphasis added). Where the arbitrable and non-arbitrable claims share common facts and issues, simultaneous litigation is duplicative and risks inconsistent verdicts, and thus eviscerates the foundation of the trial court's discretion to separate claims, namely furthering convenience and avoiding prejudice. Consequently, as a matter of law, non-arbitrable claims that include issues related to arbitrable claims are not severable.

Therefore, while I agree with the Majority that the trial court erred in its application of § 7304(d), I would remand for the trial court to stay all judicial proceedings pending the arbitration rather than granting the trial court the discretion to proceed with the non-severable Employment Agreement claims. On that issue, I respectfully dissent.

Fineman v. Perr

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Fineman v. Perr

Fineman v. Perr

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Fineman v. Perr

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Fineman v. Perr

Fineman v. Perr

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