Kunz, E. v. Toll Brothers, Inc.

J. A12040/18

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37

ERIC AND SIGRID KUNZ, H/W, : IN THE SUPERIOR COURT OF

: PENNSYLVANIA

Appellants :

:

v. :

:

TOLL BROTHERS, INC., :

TOLL PA II, L.P., TOLL PA GP CORP., :

BROAD RUN ASSOCIATES, L.P., : No. 3107 EDA 2017

TOLL ARCHITECTURE, INC., AND :

TOLL ARCHITECTURE I, P.A. :

Appeal from the Order August 14, 2017,

in the Court of Common Pleas of Chester County

Civil Division at No. 2016-01218-MJ

BEFORE: BOWES, J., OTT, J., AND FORD ELLIOTT, P.J.E.

MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED JULY 16, 2018

Eric and Sigrid Kunz, husband and wife, appeal from the August 14,

2017 order entered in the Court of Common Pleas of Chester County denying

their motion for reconsideration of the trial court’s December 12, 2016 order

granting the petition of appellees Toll Brothers, Inc.; Toll PA II, L.P.; Toll PA

GP Corp.; Broad Run Associates, L.P.; Toll Architecture, Inc.; and Toll

Architecture I, P.A. (collectively, “Toll Brothers”), to compel arbitration and

reinstating the December 12, 2016 order. We quash this appeal.

The trial court set forth the following:

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Procedural History

On July 19, 2016, [appellants] filed their complaint

because of what they contend are “substantial

construction defects” and because of [Toll Brothers’]

[“]misrepresentations regarding the quality of the

construction” of their home. [Appellants’] complaint

assert[s] claims against [Toll Brothers] for violation of

Pennsylvania’s Unfair Trade Practices and Consumer

Protection Law (Count I), breach of express warranty

(Count II), breach of implied warranty (Court III),

negligence (Count IV), negligent supervision

(Count V), and civil conspiracy (Count VI).

On August 31, 2016, [Toll Brothers] filed a petition to

compel arbitration pursuant to arbitration language

within the documents related to the purchase of

[appellants’] home. [Appellants] opposed the petition

arguing that the arbitration provisions in the

governing documents were unenforceable “as they

are indefinite[,] vague and contradictory.” Following

briefing by the parties, on December 12, 2016, the

court entered an order granting [Toll Brothers’]

petition to compel arbitration.

On December 22, 2016, [appellants] filed an

emergency motion asking the court to reconsider its

decision or amend its order for immediate appeal. On

January 3, 2017, the court entered a new order

striking its December 12th order compelling arbitration

pending further consideration by the court. The

parties also were given additional time to conduct

discovery on the issue of the allegedly “different”

arbitration provisions.

On January 12, 2017, [Toll Brothers] then filed their

own motion to vacate, requesting that the court

reinstate its original order compelling arbitration. On

February 24, 2017, the court denied [Toll Brothers’]

motion to vacate and clarified for the parties the

issues that were the subject of the reconsideration

order. After additional briefing and oral argument

held on July 25, 2017, [appellants’] motion for

reconsideration is now ripe for decision.

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The Relevant Arbitration Provisions

There are two documents at issue in this dispute. The

first is an “Agreement of Sale” (“AOS”) between

[appellants] and [appellee] Broad Run [Associates,

L.P. (“Broad Run”)]. The second document is a limited

warranty entitled “Toll Brothers Limited Warranty”

(“Limited Warranty”). Both documents contain

arbitration provisions.

The arbitration clause in the AOS executed by

[appellants] and Broad Run reads as follows:

ARBITRATION : Buyer . . . hereby agrees

that any and all disputes with Seller,

Seller’s parent company or their

subsidiaries or affiliates arising out of the

Premises, this Agreement, the Home

Warranty, any other agreements,

communications or dealings involving

Buyer, or the construction or condition of

the Premises including, but not limited to,

disputes concerning breach of contract,

express and implied warranties, personal

injuries and/or illness, mold-related

claims, representations, and/or omissions

by Seller, on-site and off-site conditions

and all other torts and statutory causes of

action (“Claims”) shall be resolved by

binding arbitration in accordance with the

rules and procedures of Construction

Arbitration Services, Inc. or its successor

or an equivalent organization selected by

Seller. If CAS is unable to arbitrate a

particular claim, then that claim shall be

resolved by binding arbitration pursuant

to the Construction Rules of Arbitration of

the American Arbitration Association or its

successor or an equivalent organization

selected by Seller. In Addition, Buyer

agrees that Buyer may not initiate any

arbitration proceeding for any Claim(s)

unless and until Buyer has first given

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Seller specific written notice of each claim

(at 3103 Philmont Avenue, Huntingdon

Valley, PA 19006, Attn: Warranty Dispute

Resolution) and given Seller a reasonable

opportunity after such notice to cure any

default, including the repair of the

Premises, in accordance with the Home

Warranty. The provisions of this

paragraph shall be governed by the

provisions of the Federal Arbitration Act,

9 U.S.C. §§ 1, et seq. and shall survive

settlement.

The arbitration clause in the Limited Warranty

between [appellants] and [appellee] Toll Brothers,

Inc., reads as follows:

Any disputes between YOU and US related

to or arising from this LIMITED

WARRANTY will be resolved by binding

arbitration. Disputes subject to binding

arbitration include but are not limited to:

A. WE do not agree with YOU

that a DEFICIENCY or

DEFINED STRUCTURAL

ELEMENT FAILURE is covered

by the LIMITED WARRANTY;

B. WE do not correct a

DEFICIENCY or DEFINED

STRUCTURAL ELEMENT

FAILURE to YOUR satisfaction

or in a manner that YOU

believe this LIMITED

WARRANTY requires;

C. WE fail to respond to YOUR

written notice of a

DEFICIENCY or DEFINED

STRUCTURAL ELEMENT

FAILURE;

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D. Disputes related to COMMON

Elements;

E. Alleged breach of this

LIMITED WARRANTY[;]

F. Alleged violations of

consumer protection, unfair

trade practices, or other

statutes;

G. Disputes concerning the

issues that should be

submitted to binding

arbitration;

H. Disputes concerning the

timeliness [to] binding

arbitration requests.

Any binding arbitration proceeding will be

conducted by an independent arbitration

organization by the WARRANTY PROGRAM

ADMINISTRATOR. The rules and

procedures followed will be those of the

designated arbitration organization. A

copy of the applicable rules and

procedures will be delivered to YOU upon

request.

Trial court opinion, 8/14/17 at 1-3 (record citations omitted).

Following oral argument, the trial court entered its August 14, 2017

order denying appellants’ motion for reconsideration of its December 12, 2016

order granting Toll Brothers’ petition to compel arbitration and reinstating its

December 12, 2016 order. On September 12, 2017, appellants filed a notice

of appeal to this court. The trial court then ordered appellants to file a concise

statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b).

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Appellants timely complied. In response, the trial court entered an order

stating that “[t]he present appeal seeks review of an order directing this

matter to arbitration [; however,] [u]nder Pennsylvania law, such an order is

not final and appealable.”1 (Order of court, 10/4/17 at 1.)

On October 23, 2017, this court ordered appellants to show cause within

ten days as to the basis of our jurisdiction over this matter. (Order of court,

10/23/17.) Appellants timely complied by filing a “brief in support of

jurisdiction over this appeal.” On November 16, 2017, this court discharged

the show-cause order, referred the appealability issue to this merits panel,

and directed the parties to be prepared to address the issue in their briefs and

at oral argument. (Id.).

We must, therefore, determine the appealability of the order that

appellants wish to appeal from because “[t]he appealability of an order goes

directly to the jurisdiction of the [c]ourt asked to review the order.” N.A.M.

v. M.P.W., 168 A.3d 256, 260 (Pa.Super. 2017) (citation omitted). With

respect to appealability,

[t]his Court may address the merits of an appeal

taken from “(a) a final order or an order certified as a

final order; (2) an interlocutory order [appealable] as

of right; (3) an interlocutory order [appealable] by

permission; or (4) a collateral order.” Commerce

Bank v. Kessler, 2012 PA Super 100, 46 A.3d 724,

728 (Pa. Super. 2012), quoting Stahl v. Redcay,

1 The trial court further noted that “[e]ven if the present appeal were

considered to be proper, the [trial] court believes that its [o]rder of August 14,

2017, adequately explains the basis for the court’s decision.” (Trial court

opinion, 10/4/17 at 2.)

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2006 PA Super 55, 897 A.2d 478, 485 (Pa. Super.

2006) (citations omitted); see also Pa.R.A.P. 341(b).

“As a general rule, only final orders are appealable,

and final orders are defined as orders disposing of all

claims and all parties.” Am. Indep. Ins. Co. v. E.S.,

2002 PA Super 289, 809 A.2d 388, 391 (Pa. Super.

2002); see also Pa.R.A.P. 341(a) (“[A]n appeal may

be taken as of right from any final order of a

government unit or trial court.”).

Havalind v. Kline & Specter, P.C., 182 A.3d 488, 492 (Pa.Super. 2018).

Preliminarily, we note that “[t]he law is clear that an order that has the

effect of directing the parties to arbitrate a matter is interlocutory and not

appealable.” Niemiec v. Allstate Ins. Co., 721 A.2d 807, 808 (Pa.Super.

1998) (citation omitted). Therefore, the interlocutory order compelling

arbitration from which appellants seek to appeal is not appealable as a final

order. Additionally, an interlocutory order compelling arbitration is not

appealable as of right pursuant to Pennsylvania Rule of Appellate

Procedure 311. Pa.R.A.P. 311 (enumerating those interlocutory orders from

which an appeal may be taken as of right). Further, the order is not

appealable as an interlocutory order by permission under Pa.R.A.P. 312

because appellants never petitioned the trial court for permission to appeal

the interlocutory order as required under Pa.R.A.P. 1311 and the trial court

never granted permission.

Here, appellants maintain that this court has jurisdiction over this appeal

pursuant to the collateral order doctrine set forth in Pa.R.A.P. 313. Rule 313

defines a collateral order as “an order separable from and collateral to the

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main cause of action where the right involved is too important to be denied

review and the question presented is such that if review is postponed until

final judgment in the case, the claim will be irreparably lost.”

Pa.R.A.P. 313(b).

[T]he collateral order doctrine is a specialized,

practical application of the general rule that only final

orders are appealable as of right. Thus, Rule 313

must be interpreted narrowly, and the requirements

for an appealable collateral order remain stringent in

order to prevent undue corrosion of the final order

rule. To that end, each prong of the collateral order

doctrine must be clearly present before an order may

be considered collateral.

Price v. Simakas Co., 133 A.3d 751, 755 (Pa.Super. 2016) (internal citations

and quotation marks omitted).

“With regard to the first prong of the collateral order doctrine, an order

is separable from the main cause of action if it can be resolved without an

analysis of the merits of the underlying dispute and if it is entirely distinct

from the underlying issue in the case.” Shearer v. Hafer, 177 A.3d 850, 858

(Pa. 2018) (citation and internal quotation marks omitted). Here, the issue

of whether the trial court erred when it entered its order compelling arbitration

is separate and distinct from the allegations of misrepresentation, violations

of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, breach

of express warranty, breach of implied warranty, negligence, negligent

supervision, and civil conspiracy that appellants set forth in their complaint.

Therefore, appellants satisfy the first prong of the collateral order doctrine.

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With respect to the second prong of the collateral order doctrine, which

is the importance prong, “a right is important if the interests that would go

unprotected without immediate appeal are significant relative to the efficiency

interests served by the final order rule. Further, the rights involved must

implicate interests deeply rooted in public policy and going beyond the

particular litigation at hand.” Id. at 858-859 (citations, brackets, and internal

quotation marks omitted).

Here, appellants claim that the order compelling arbitration “implicates

important rights that are too important to be denied immediate review.”

(Appellant’s brief at 4.) Specifically, appellants claim that the order violates

their due process right to be heard by the tribunal that has jurisdiction over

the matter, which, appellants assert, is the trial court. (Id.) Appellants

further contend that “the rights at stake are not limited to appellants[, as

appellants] are one family out of many against whom Toll Brothers has

attempted to subject to the contradictory provisions in the [a]greement of

[s]ale and [l]imited [w]arranty.” (Id. (emphasis in original).) In so arguing,

appellants rely on Commonwealth v. Philip Morris, Inc., 128 A.3d 334

(Pa.Commw. Ct. 2015).

In that tobacco litigation case, 52 states and territories, including the

Commonwealth of Pennsylvania (“Commonwealth”), entered into a master

settlement agreement (“MSA”) with certain tobacco manufacturers to settle

tobacco-related health-care costs. Id. at 338-339. The MSA provided that

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“[a]ny dispute, controversy or claim arising out of or relating to calculations

performed by, or any determinations made by, the Independent Auditor . . .

shall be submitted to binding arbitration.” Id. at 339. A calculation dispute

arose as to whether certain states qualified for payment adjustments for the

years 1999 to 2002, but was settled. The same calculation dispute then arose

for the year 2003. In that dispute, tobacco manufacturers and most states,

including the Commonwealth, agreed to multi-state arbitration. The dispute

once again arose for the 2004 calendar year. Id. at 340. The Commonwealth

filed a motion to compel single-state arbitration, and the tobacco

manufacturers filed a motion to compel multi-state arbitration. The trial court

granted the manufacturers’ motion to compel multi-state arbitration.

The Commonwealth appealed claiming that the order compelling

multi-state arbitration was appealable as a collateral order. Id. With respect

to the second prong of the collateral order doctrine, the Commonwealth

contended that the order raised important issues with respect to its sovereign

rights in that it would not be permitted to select an independent arbitrator

that would apply Pennsylvania law but would be compelled to jointly decide

the appointment of the arbitrator with all of the states and territories subject

to multi-state arbitration and that the arbitrator would apply generic legal

principles. Id. at 341. The Commonwealth Court agreed finding that the

Commonwealth satisfied the second prong of the collateral order doctrine

because “[t]he issue is important not only to the parties of the MSA, but to

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the public at large because the sovereign power in our government belongs

to the people.” Id. at 346.

Here, in their “brief in support of jurisdiction over this appeal,”

appellants contend that they satisfy the second prong of the collateral order

doctrine because:

the August 14 [o]rder implicates important due

process interests that cannot go unprotected. At

stake is whether [appellants] are required to arbitrate

their construction defect claims in an arbitration forum

that [appellants] did not agree to, or whether

[appellants] are entitled to proceed in the Court of

Common Pleas, which has jurisdiction over this

matter. As set forth in [Philip Morris], the right to

have claims heard by the tribunal with jurisdiction is

a per se due process right, and due process rights are

generally “too important to be denied review.”

[Philip Morris, 128 A.3d] at 344. Accordingly, on

this basis alone, the second prong of the collateral

order doctrine is met.

Appellant’s brief in support of jurisdiction over this appeal, 11/2/17 at 19.

In their brief, appellants reiterate that position, but fail to explain how

their voluntary and mutual agreement to arbitrate their disputes with

Toll Brothers denies them due process and implicates interests deeply rooted

in public policy that go beyond the litigation they initiated against

Toll Brothers. This is not a case where the trial court ordered arbitration

absent an agreement to arbitrate or in the absence of a rule of law requiring

arbitration. See Gilyard v. Redevelopment Auth. of Philadelphia., 780

A.2d 793 (Pa.Commw.Ct. 2001) (reversing order remanding appeal to

arbitration where trial court had no legal basis to transfer matter to a panel of

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arbitrators for a hearing). Additionally, this case is not analogous to

Philip Morris wherein the order to compel multi-state arbitration, as opposed

to single-state arbitration, implicated the Commonwealth’s sovereign rights

that ultimately belong to the citizens of the Commonwealth. Philip Morris,

128 A.3d at 346. In this case, appellants entered into an agreement of sale

for the construction of a home that included a limited warranty. Both the

agreement of sale and the ancillary limited warranty contained arbitration

provisions that appellants do not wish to abide by. Therefore, the issue here

does not concern a right that implicates interests deeply rooted in public policy

that go beyond appellants’ litigation against Toll Brothers. The issue here

concerns appellants’ unhappiness with the arbitration provisions in their

contractual agreements with Toll Brothers. Additionally, the only deeply

rooted public policy involved in this case is the well-established public policy

that Pennsylvania favors arbitration because it relieves parties of expensive

litigation and eases court congestion. Cardinal v. Kindred Healthcare,

Inc., 155 A.3d 46, 52 (Pa.Super. 2017).

In an attempt to demonstrate that the right involved goes beyond the

particular litigation at hand, appellants claim that they are “one family out of

many against whom Toll Brothers has attempted to subject to the

contradictory arbitration provisions in the [a]greement of [s]ale and [l]imited

[w]arranty.” (Appellant’s brief at 4 (emphasis in original).) This contention

is equally unavailing and fails to implicate interests deeply rooted in public

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policy because it merely raises the possibility that other individuals who may

have voluntarily entered into home-construction contracts with Toll Brothers

that contain arbitration provisions may not want to abide by those arbitration

provisions in the event that a dispute arises. Clearly, appellants fail to satisfy

the second prong of the collateral order doctrine.

Finally, even if we determined that appellants satisfied the second

prong, appellants concede that their claim will not be irreparably lost if

appellate review is postponed until after arbitration, as follows:

If the August [o]rder is not immediately appealable,

in the best case scenario, [a]ppellants – who are

senior citizens – will be forced to expend substantial

amounts of money and time over the course of years

before obtaining appellate review of the August

[o]rder, only to start the litigation from beginning in

the Chester County Court of Common Pleas.

Appellant’s brief at 7. Therefore, even assuming that appellants satisfied the

second prong of the collateral order doctrine, by their own admission,

appellants would not satisfy the third prong.

Appeal quashed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 7/16/18

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