Wednesday, October 28, 2015

arbitration - NAF designation - severability

Wert v. Manor Care of Carlisle – Pa. Supreme Court – 10-27-15




Golden Living Center - Gettysburg et al. (“Appellants”) appeal the Superior Court’s decision affirming, in relevant part, the trial court’s order overruling Appellants’ preliminary objections seeking to compel arbitration and reserving for trial the underlying

negligence action filed by Evonne K. Wert (“Appellee”), daughter of Anna E. Kepner (“Decedent”) and executrix of Decedent’s estate. For the following reasons, we affirm the order of the Superior Court and remand to the trial court for further proceedings

consistent with this decision.


The following issues of first impression have been presented before this Court:


(a) Whether the Superior Court’s decision in Stewart v.

GGNSC-Canonsburg, L.P., 9 A.3d 215 (Pa. Super. 2010), holding that the

NAF Designation voided an identical Arbitration Agreement, was

incorrectly decided and should be reversed, where there is no evidence

indicating that the NAF designation was integral to the Agreement?


(b) Whether the Court may ignore undisputed testimonial evidence that

the party seeking to void the Agreement did not consider the NAF

Designation to be an “integral part” of the Arbitration Agreement (because

she did not bother to read the agreement)?


Wert v. ManorCare of Carlisle PA, LLC, 95 A.3d 268, 268-69 (Pa. 2014) (per curiam

order) (footnote omitted).


Pursuant to the reasoning of the Stewart court and the majority of our sister jurisdictions, we find that, post-consent decree, Section five of the FAA cannot preserve

NAF-incorporated arbitration agreements unless the parties made the NAF’s availability  non-essential by specifically varying the terms of its procedure.17 Regardless of

whether Section five may apply where there is a lapse in the administrator, by its own rules, the NAF must administer its code unless the parties agree to the contrary. The

parties here agreed that any disputes “shall be resolved exclusively by binding arbitration to be conducted . . . in accordance with the [NAF] Code of Procedure, which is

hereby incorporated into this Agreement[.]” R. 348a (emphasis added).


We therefore find the provision integral and non-severable. Doing otherwise would require this Court to rewrite the Agreement. Underlying FAA policy, as interpreted by the Supreme Courtin Marmet, does not mandate a different result because our conclusion is based on settled Pennsylvania contract law principles that stand independent of arbitration.