Altoona Regional v. Schutt, C. v. University

J-A08034-14

2014 PA Super 191

ALTOONA REGIONAL HEALTH SYSTEM IN THE SUPERIOR COURT OF

PENNSYLVANIA

v.

COREY R. SCHUTT, D.O.

Appellees

v.

UNIVERSITY ORTHOPEDICS CENTER,

LTD.

Appellant No. 1072 WDA 2013

Appeal from the Order Entered on May 30, 2013

In the Court of Common Pleas of Blair County

Civil Division at No.: Civil Action No. 2012 GN 621

BEFORE: ALLEN, J., OLSON, J., and WECHT, J.

OPINION BY WECHT, J.: FILED SEPTEMBER 04, 2014

2013 order of the Court of Common Pleas of Blair County. UOC alleges that

the trial court erred when it granted partial judgment on the pleadings and a

injunction prevented UOC from enforcing a restrictive covenant provision in

Corey R. Schutt, D

Schutt from practicing orthopedics or related subspecialties for two years

facilities. UOC also asserts that the trial court erred in sustaining the

preliminary objections filed by Dr. Schutt. For the reasons that follow, and

J-A08034-14

upon review of Rules 1034 and 2227 of our Rules of Civil Procedure, we

must vacate in part, reverse in part, and remand for further proceedings.

On October 27, 2009, UOC and Dr. Schutt entered into a three-year

employment agreement. See Complaint for Injunction and Declaratory

Support and

Relief, 2/22/2012, Exh. A.1

Approximately two years later, Dr. Schutt terminated his employment

-owned subsidiary of ARHS. In a January

11, 2012 letter to Dr. Schutt, UOC asserted that Dr. Schutt had breached

the restrictive covenant of the Employment Agreement by beginning work at

Elite Orthopedics, and UOC claimed it was entitled to $250,000 in liquidated

damages as a result of the alleged breach. ARHS responded with a January

25, 2012 letter that demanded UOC cease any attempts to enforce the

restrictive covenant. Specifically, ARHS cited an exception to the restrictive

covenant in Section 5.8 of the Recruitment Agreement.

On February 22, 2012, ARHS filed a complaint against UOC in the

Court of Common Pleas of Blair County. The complaint sought an injunction

to prevent UOC from enforcing the restrictive covenant against Dr. Schutt,

-2-

J-A08034-14

ights under the

complaint. In relevant part, UOC sought dismissal of the complaint because

ARHS had failed to join Dr. Schutt, an assertedly indispensable party. See

ry Objection to Complaint, 3/14/2012, at 5-6. In an order

and opinion dated August 1, 2012, the learned trial court concluded that Dr.

Schutt was an indispensable party pursuant to Pa.R.C.P. 2227(a):

Persons having only a joint interest in the subject matter of an

action must be joined on the same side as plaintiffs or

defendants. Pa.R.C.P. 2227[(a)]. Pennsylvania law holds that a

with the claims of the litigants that no decree can be made

w Sprague v. Casey, 550 A.2d

184, 189 (Pa. 1988). In this case, the [c]omplaint relates to the

enforcement of agreements to which Dr. Schutt is [a] party and

the disposition of this [c]omplaint will either render him able to

practice medicine freely or may lead to further litigation

involving his ability to practice and obligations to pay damages

have jurisdiction to render a judgment without the presence of

Dr. Schutt because of the principle that a decree should finally

determine the rights that all persons have in a subject. Powell

v. Shepard, 113 A.2d 261, 265 (Pa. 1955). Therefore, it is

] rights are so connected that no

decree can be made without impairing those rights.

Order, 8/1/2012, at 3-4 (citations modified, italics added). Consequently,

within which to amend its pleading.

On August 7, 2012, ARHS filed an amended complaint. This pleading

was virtually identical to the original complaint and requested the same

-3-

J-A08034-14

injunctive and declaratory relief. The only substantive difference between

the two filings was that,

complaint added Dr. Schutt as a named party. See

Complaint, 8/7/2012, ¶¶27-35. ARHS chose to designate Dr. Schutt as an

On September 21, 2012, UOC respon

with an answer, new matter, and counterclaims. In this filing, UOC asserted

various counterclaims against ARHS and Dr. Schutt, including breach of

contract, tortious interference, and breach of fiduciary duty. The

counterclaims also sought to enforce the restrictive covenant against Dr.

Schutt, and requested that ARHS provide UOC allegedly unpaid income

contributions. See Answer, New Matter and Counterclaims to First Amended

Complaint for Injunction and Declaratory Relief, 9/21/2012, at 22-32.

counterclaims. In pertinent part, Dr. Schutt asserted a demurrer on all

counterclaims, arguing that Pa.R.C.P. 2227(b) barred UOC from filing

affirmative counterclaims against Dr. Schutt because of his involuntary

Counterclaims, 10/10/2012, ¶¶10-16. On October 18, 2012, ARHS filed a

On December 13, 2012, UOC filed a

-4-

J-A08034-14

preliminary objections, ARHS filed a motion for partial judgment on the

the Employment Agreement. See Motion for Partial Judgment on the

Pleadings, 1/2/13, ¶2. ARHS argued that the language in Section 5.8 of the

Recruitment Agreement unequivocally forbids UOC from attempting to

enforce the restrictive covenant in the event that Dr. Schutt commences

employment with an ARHS subsidiary. Id. at ¶18.

motion was premature because the pleadings were not closed and because

material facts remained in dispute. On June 5, 2013, the trial court issued

for injunctive and declaratory

relief:

Section 5.8 of the Recruitment Agreement . . . is a carve-out

provision which specifically prevents UOC from undertaking any

efforts to restrict, prohibit or otherwise penalize Dr. Schutt from

providing services as an employee of or contractor of any entity

which is owned or controlled by ARHS or any of its subsidiaries

or its affiliates. Section 5.8 concludes with [sic] its last sentence

by entitling ARHS to injunctive relief if UOC either directly

violates[,] or is likely to violate[,] the subsection.

Section 5.8 is applicable to the current relationship and the

[c]ourt agrees with ARHS that the relief which [ARHS] requests

-5-

J-A08034-14

is abundantly clear as contained within the four corners of

[S]ection 5.8. The [Recruitment] Agreement also contains a

statement that includes a standard paragraph precluding

consideration of any other interpretation of the document not

reduced to writing.

-8.

Next, the tr

affirmative counterclaims:

Dr. Schutt relies on Pa.R.C.P. 2227(b) as it relates to involuntary

plaintiffs. Dr. Schutt further relies on Karoly v. Cap, 530 A.2d

436 (Pa. 1987), to buttress his argument that Pa.R.C.P. 2227

joined as involuntary [p]laintiffs. Dr. Schutt reasons that if

[i]nvoluntary [plaintiffs] are not required to file pleadings, [then]

affirmative counterclaims seeking injunctive relief and money

damages should not be permitted.

The [c]ourt agrees with Dr. Schutt and therefore grants this

demur[r]er and dismisses all [c]ounterclaims brought against Dr.

Schutt in his role of [i]nvoluntary [p]laintiff.

By this specific portion of the [o]rder, the [c]ourt is granting the

demur[r]er as it involves Dr. Schutt being an [i]nvoluntary

[p]laintiff. The reliance upon which [sic] this [c]ourt is granting

the dem

[i]nvoluntary [p]laintiff.

Id. at 10-11 (citations modified or omitted). The trial court further stated

the [c]ourt that its earlier [o]rder allowing Dr. Schutt to be entered as an

Id. at 11.

On June 26, 2013, UOC filed a notice of appeal. On July 2, 2013, the

trial court ordered UOC to file a concise statement of errors complained of on

-6-

J-A08034-14

appeal pursuant to Pa.R.A.P. 1925(b). On July 19, 2013, UOC timely filed its

Rule 1925(b) statement. On September 26, 2013, in lieu of an opinion, the

in the above[-]caption

UOC presents the following issues for our review:

A. Whether the trial court erred by ruling that an indispensable

party joined as a[n] involuntary plaintiff was not subject to

related counterclaims?

B. Whether the trial court erred by granting t

for partial judgment on the pleadings, and by dismissing the

not complete, and where the pleadings of record disclosed the

existence of material disputed facts?

C. Whether the trial court erred by granting a permanent

injunction that prevented the defendant from asserting tort

and contract claims, where the right to recovery was not clear

on the face of the pleadings alone?

Brief for UOC at 3.

Before addressing the merits of the issues presented by UOC, we must

clarify the appealability of the underlying order. Inasmuch as the issue of

appealability affects our jurisdiction, we may raise it sua sponte. Morgan

Trailer Mfg. Co. v. Hydraroll, Ltd., 804 A.2d 26, 29 30 (Pa. Super. 2002).

As a general rule, this Court has jurisdiction only over appeals taken from

final orders. Commonwealth v. Scarborough, 64 A.3d 602, 608 (Pa.

See Pa.R.A.P.

341(b). Here, the trial cou

-7-

J-A08034-14

judgment on the pleadings. T.C.O. at 12-13. Thus, at first blush, it would

appear that we lack jurisdiction.

However, Pa.R.A.P. 311 carves out an exception to this general rule.

Specifically, an appeal may be taken as of right from an order that grants or

denies an injunction. Pa.R.A.P. 311(a)(4). The instant order granted ARHS

an injunction against UOC. Furthermore, the portion of the order sustaining

quest for injunctive relief

listed in its fourth counterclaim. Because the underlying order granted and

denied injunctions, our jurisdiction is proper. See Vonada v. Long, 852

A.2d 331, 335-

contained in Rule 311(a)(4) is that an order refusing [or granting] a request

for an injunction is an interlocutory order appealable as of right unless the

order involves an injunction issued pursuant to two explicit provisions of the

Divorce Code or the order is in the form of a decree nisi

Due to the nature of our disposition, we will begin our discussion by

Specifically, UOC alleges that judgment on the pleadings was premature

because those pleadings were still open. We agree.

Our scope and standard of review in this context are well-defined:

Our scope of review on an appeal from the grant of judgment on

the pleadings is plenary. Meehan v. Archdiocese of Phila.,

870 A.2d 912, 918 (Pa. Super. 2005). Entry of judgment on the

pleadings is permitted under Pennsylvania Rule of Civil

-8-

J-A08034-14

closed, but within such time as not to unreasonably delay trial,

1034(a). A motion for judgment on the pleadings is similar to a

demurrer. Citicorp N. Am., Inc. v. Thornton, 707 A.2d 536,

538 (Pa. Super. 1998). It may be entered when there are no

disputed issues of fact and the moving party is entitled to

judgment as a matter of law. Id. In determining if there is a

dispute as to facts, the court must confine its consideration to

the pleadings and relevant documents. Id. On appeal, we

accept as true all well-pleaded allegations in the complaint.

Meehan, supra.

ruling was based on a clear error of law or whether there were

facts disclosed by the pleadings which should properly be tried

before a jury or by a judge sitting without a jury. Citicorp,

supra.

Neither party can be deemed to have admitted either

conclusions of law or unjustified inferences. Moreover, in

conducting its inquiry, the court should confine itself to the

pleadings themselves and any documents or exhibits

properly attached to them. It may not consider

inadmissible evidence in determining a motion for

case is clear and free from doubt such that a trial would

prove fruitless will an appellate court affirm a motion for

judgment on the pleadings.

, 606 A.2d 470, 471-72 (Pa. Super.

1992) (quotations and citations omitted).

Consolidation Coal Co. v. White, 875 A.2d 318, 325-26 (Pa. Super. 2005)

(citations modified).

UOC alleges that the motion for judgment on the pleadings was

premature because Pa.R.C.P. 1034 requires that the relevant pleadings be

closed before any party may file such a motion. Specifically, UOC maintains

that, at the time when ARHS interposed its motion, the relevant pleadings

were not closed because Dr. Schutt had yet to file a substantive response to

-9-

J-A08034-14

for UOC at 23-24.

Motions for judgment on the pleadings are governed by Pa.R.C.P.

1034, which reads as follows:

Rule 1034. Motion for Judgment on the Pleadings

(a) After the relevant pleadings are closed, but within such

time as not to unreasonably delay the trial, any party may

move for judgment on the pleadings.

(b) The court shall enter such judgment or order as shall be

proper on the pleadings.

The relevant scope of pleadings is governed by Pa.R.C.P. 1017:

Rule 1017. Pleadings Allowed

(a) Except as provided by Rule 1041.1,[1] the pleadings in an

action are limited to

(1) a complaint and an answer thereto,

(2) a reply if the answer contains new matter, a

counterclaim or a cross-claim,

(3) a counter-reply if the reply to a counterclaim or

cross-claim contains new matter,

(4) a preliminary objection and a response thereto.

have considered the ARHS [motion for partial judgment on the pleadings]

ounterclaims, and

____________________________________________

1

Pa.R.C.P. 1041.1 applies only to asbestos litigation.

- 10 -

J-A08034-14

whether the relevant pleadings were, in fact, closed when ARHS filed its

motion for judgment on the pleadings.

With specific reference to the interplay between the close of pleadings

and preliminary objections, this Court has stated the following:

Preliminary objections are a form of pleading allowable in

equity. . . . Pa.R.C.P. 1028 is the logical extension of Rule 1017

and provides for the substantive requirements and handling of

considered ripe for consideration of its merits, either by trial or

other hearing, the pleadings must be closed. Implicit in this

holding is the requirement that all preliminary objections a part

of the pleadings be disposed of by the trial court.

Reddick v. Puntureri, 363 A.2d 1198, 1200 (Pa. Super. 1976).2 Instantly,

the record confirms that Dr. Schutt filed his preliminary objections on

October 10, 2012. Between the time that Dr. Schutt filed his preliminary

objections and the time that ARHS filed its motion for partial judgment on

the pleadings on January 2, 2013, the trial court took no action regarding

3

Based on this record, it is evident that

____________________________________________

2

See also Republic Servs. of Penna., LLC v. Krone, 2389 C.D.

court is first required to rule on the [preliminary objections] before

considering the merits, and the failure to do so is a fatal procedural defect

3

objections until it issued its June 5, 2013 opinion.

- 11 -

J-A08034-14

motion for partial judgment on the pleadings. Our precedent leads us to

conclude that the pendency of unresolved preliminary objections means that

the pleadings have not yet closed. Reddick, supra. Consequently, we

motion for partial judgment on the pleadings was procedurally proper.4,5

See

Based upon the foregoing discussion, we hold that the trial court erred

____________________________________________

4

parties to the motion for judgment on the pleadings must be closed prior to

partial judgment on the pleadings was only between ARHS and UOC, and

See Brief for ARHS at 8.

However, this argument is undone by the facts that (1) Dr. Schutt had been

itigation; and (2)

Agreement.

5

This Court has held that, to avoid waiver, a respondent must make a

timely objection to improper pleadings. See Vintage Homes, Inc. v.

Levin, 554 A.2d 989, 992 (Pa. Super. 1989) (holding that an appellant

-

presenting the merits of the

motion for partial judgment. See

Partial Judgment on the Pleadings, 1/22/2013, at 6-

[p]reliminary [o]bjections have been resolved, and until the parties have an

opportunity to conduct discovery related to the claims and disputed factual

allegations framed by the pleadings, the [m]otion is not ripe for decision,

and should be denied as prem

- 12 -

J-A08034-14

before disposing of the preliminary objections in this case. Because the

Rule 1034(a). Thus

third claim on this appeal,

appeal). In relevant part, UOC argues that, as a party defendant, it should

be able to assert counterclaims against Dr. Schutt. The litigants have

plaintiffs are not subject to affirmative counterclaims by party defendants.

Before addressing this question, however, we must assess whether Dr.

sition was based upon Sprague v. Casey, 550 A.2d 184,

189 (Pa. 1988), and the rules governing indispensable parties pursuant to

subsection 2227(a). See Order, 8/1/2012, at 3-

without impairing

Sprague clearly states that a party must be joined if

subsequent opinion, the trial court stated that its order authorized ARHS to

- 13 -

J-A08034-14

join Dr. Schutt as an involuntary plaintiff pursuant to subsection 2227(b).

See T.C.O. at 11.6

In relevant part, Pa.R.C.P. 2227 reads as follows:

Rule 2227. Compulsory Joinder

(a) Persons having only a joint interest in the subject matter

of an action must be joined on the same side as plaintiffs

or defendants.

(b) If a person who must be joined as a plaintiff refuses to

join, he or she shall, in a proper case, be made a

defendant or an involuntary plaintiff when the substantive

law permits such involuntary joinder.

Kelly v. Carborundum Co., 453 A.2d 624, 628 (Pa.

Super. 1982). The text of the rule itself draws a distinction between

compulsory joinder pursuant to subsection 2227(a) and involuntary joinder

____________________________________________

6

to participate in this action. See

not join with ARHS in the litigation filed by ARHS. Dr. Schutt did not want to

be a part

1, 2012 order did not explicitly direct ARHS to join Dr. Schutt as an

involuntary plaintiff in the instant lawsuit, it appears that ARHS joined Dr.

Schutt as an involuntary plaintiff upon its own authority. While this

procedure appears irregular, our Supreme Court has specifically held that

involuntary joinder may be accomplished even in the absence of a specific

order from a civil trial court. See Onorato v. Wissahickon Park, Inc.,

244 A.2d 22, 24 (Pa. 1968) (in the absence of specific proceedings instituted

to effect involuntary joinder under the Pennsylvania Rules of Civil Procedure,

on the caption of

invalidate that joinder.

- 14 -

J-A08034-14

action, brought against only one party where there exists no timely attempt

Moorehead

v. Lopatin

2227(b)] is applicable only where the substantive law provides that an

interest is joint and the holder of such interest refuses to join. Involuntary

joinder is necessary because without such joinder an indispensable party is

Kelly, 453 A.2d at 628.

Onorato v. Wissahickon Park, Inc., 244 A.2d 22 (Pa. 1968), is one

of the few precedents in Pennsylvania discussing the law concerning

involuntary plaintiffs.7 In that case, our Supreme Court held that, for

involuntary joinder under subsection 2227(b), the substantive law applicable

to a given case must explicitly permit such joinder. 244 A.2d at 25. This

the joinder issue reduces itself to whether, in the language of Rule 2227(b),

____________________________________________

7

Although more than forty-six years have passed since our Supreme

Court issued its decision in Onorato, that case continues to represent the

joinder. The High Court has issued two decisions since Onorato that

address involuntary joinder, albeit briefly. In Heckendorn v. Consolidated

Rail Corp., 456 A.2d 609 (Pa. 1983), and a decade later in CRY, Inc. v.

Mill Service, Inc., 640 A.2d 372 (Pa. 1994), our Supreme Court declined to

expand the substantive law permitting involuntary joinder. We read

Heckendorn and CRY, Inc. for the proposition that our Supreme Court has

not significantly altered involuntary joinder law since Onorato.

- 15 -

J-A08034-14

Karoly v. Cap, 530 A.2d 436, 441 (Pa. Super. 1987) (quoting Onorato,

244 A.2d at 24-25).

In Onorato, our Supreme Court held that the law permitting

involuntary joinder is surpassingly narrow:

The Note of the Procedural Rules Committee to Rule 2227(b)

states that under present rules of substantive law,[8] proper

cases for joining a party as an involuntary plaintiff exist in only

the four instances where:

(1) The action is in rem.

(2) The unwilling person can be regarded as estopped by his

conduct from objecting to the prosecution of the suit

without his consent.

(3) The willing plaintiff and the unwilling person are joint

tenants or tenants by the entireties and the action is

brought to preserve or recover the jointly owned property

or damages for injury to such property.

(4) The action is equitable in nature and no recovery of money

damages is sought.

244 A.2d at 25. The fourth circumstance enumerated by our Supreme Court

in Onorato

action in this case sounds purely in equity, and ARHS does not seek

monetary damages. See

____________________________________________

8

Rule 2227(b) has been amended only twice since its inception in 1940.

The first amendment, on April 18, 1975, does not appear to have

substantively altered the text of Rule 2227(b). The second amendment, on

April 12, 1999, had no effect except to render the text gender-neutral. See

Pa.R.C.P. 2227 Historical Notes.

- 16 -

J-A08034-14

Declaratory Relief, 8/7/2012, ¶¶27-35 (asserting causes of action for

damages); , 522 A.2d 1129, 1131

the case is

in the absence of a specific proceeding instituted for the purpose of

law. Onorato; Karoly, supra.9

Having

follows:

Rule 2227 does not provide an involuntary plaintiff with any

special status in the litigation, or otherwise provide that an

involuntary plaintiff is exempt from the other pleading provisions

____________________________________________

9

necessitated by the complicated nature of Pennsylvania precedent regarding

Pa.R.C.P. 2227(b). Specifically, although the text of subsection 2227(b)

Onorato states that no specific civil proceeding is required involuntarily to

join such a party to a lawsuit. See 244 A.2d at 24. Taken to its logical

conclusion in the context of Onorato, Rule 2227(b) appears to permit

involuntary joinder without the direct involvement of the trial court. Once a

long as the party qualifies under one of the categories enumerated by

Onorato. To be clear, current law does not

respect to involuntary joinder. Additionally, nothing currently requires an

involuntary plaintiff to demonstrate putative refusal to participate. In the

absence of guidance to the contrary from our Supreme Court, we must

countenance the instant joinder. Onorato, supra.

- 17 -

J-A08034-14

contained in the Pennsylvania Rules of Civil Procedure. The trial

counterclaims could not be asserted against an involuntary

plaintiff. Research has failed to locate any appellate authority

for that proposition.5

5

The decision in Karoly[,] referenced at page 10 of the

id not

involve the assertion of counterclaims against an

indispensable party, and is not applicable here.

In Karoly

monies . . .

A.2d at 437. In an answer and new matter, the defendant asserted

counterclaims for monetary damages both against the plaintiff and against

several non-parties that had neither been held indispensable nor been joined

to the litigation. The plaintiff filed preliminary objections claiming that the

defendant had improperly joined the additional parties. Specifically, the

defendant in Karoly

include the names of these new parties as involuntary party-plaintiffs. Id.

at 439. Ultimately, a panel of this Court held that involuntary joinder in that

case was improper.

Karoly does not stand for the proposition that involuntary plaintiffs

are never subject to counterclaims. Rather, Karoly was decided upon the

plaintiffs was improper because the respective rights of the plaintiff and the

involuntary plaintiffs were not sufficiently interrelated. The Karoly panel

- 18 -

J-A08034-14

held that the sole fact that a defendant has cognizable claims against non-

parties to a litigation does not permit that defendant, without more,

involuntarily to join those non-parties as plaintiffs pursuant to Rule 2227(b).

There was no determination made in Karoly that involuntary joinder acts as

a shield to immunize a party from otherwise proper counterclaims.

Turning to the instant case, it is clear that Karoly is inapplicable. Dr.

Schutt was determined to be an indispensable party pursuant to Rule

8/1/2012, at 3-4 (quoting Sprague, 550 A.2d at 189). In Karoly, there

was no determination that the putative involuntary plaintiffs were

t to assert claims of liability against Dr.

Dr. Schutt was an indispensable party to the litigation. After the trial court

agreed that Dr. Schutt was indispensable and ordered his joinder, ARHS

properly joined Dr. Schutt as an involuntary plaintiff. Once Dr. Schutt had

been properly joined as an involuntary plaintiff, he was subject to

counterclaims10 in the same fashion as any other party plaintiff.11

____________________________________________

10

Pa.R.C.P. 1031 governs counterclaims under Pennsylvania law:

(Footnote Continued Next Page)

- 19 -

J-A08034-14

In light of the foregoing dis

against Dr. Schutt were barred under Pa.R.C.P. 2227(b). See T.C.O. at 10-

we conclude that Dr. Schutt was properly joined as an involuntary plaintiff,

we also vacate

this action upon the basis of allegedly improper joinder. See T.C.O. at 14.

Order vacated in part, and reversed in part. Case remanded for

further proceedings. Jurisdiction relinquished.

_______________________

(Footnote Continued)

Rule 1031. Counterclaim.

(a) The defendant may set forth in the answer under the

civil action which the defendant has against the plaintiff at

the time of filing the answer.

(b) A counterclaim need not diminish or defeat the relief

demanded by the plaintiff. It may demand relief

exceeding in amount or different in kind from that

demanded by the plaintiff.

11

Karoly also runs afoul of Pa.R.C.P.

provided by these rules, the joinder of parties in any action shall not affect

the procedural rights which each party would have if suing or sued

counterclaims against Dr. Schutt would be otherwise invalid on their face

rect interpretation of the

- 20 -

J-A08034-14

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 9/4/2014

- 21 -