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Progressive Pipeline Management, LLC v. N. Abbonizio Contractors

April 7, 2011

PROGRESSIVE PIPELINE MANAGEMENT, LLC
v.
N. ABBONIZIO CONTRACTORS, INC., ET AL.



The opinion of the court was delivered by: Surrick, J.

MEMORANDUM

Presently before the Court is Defendants' Motion to Compel Arbitration. (ECF No. 5.) For the following reasons, Defendants' Motion will be granted in part and denied in part.

I. BACKGROUND

On July 10, 2009, Defendant Abbonizio Contractors entered into a contract with the Northampton Municipal Authority ("Authority") to construct and rehabilitate a sanitary sewer system. In connection with the project, Abbonizio purchased a surety bond from Defendant Arch Insurance naming Abbonizio as principal.*fn1 (Pl.'s Opp'n Ex. B, ECF No. 10.) Arch issued a surety bond to guarantee Abbonizio's payment to any person that furnished materials or services during the course of the project.

Al Conrad, Plaintiff Progressive Pipeline Management's vice president, engaged in discussions with Christopher Sullivan, Abbonizio's manager, about Plaintiff working as a subcontractor on the project. On July 10, 2009, Conrad submitted a proposal for Plaintiff to perform the requested work. On August 10 and 11, Conrad and Sullivan spoke on the phone to discuss the scope of the work and the terms in Conrad's proposal. (Decl. of Christopher Sullivan Ex. A at ¶ 5, ECF No. 12.) On August 11, Sullivan transmitted a written agreement offering Plaintiff a subcontracting position on the project. (Id. Exs. B-C.) Abbonizio's proposed contract included a transmittal letter, which states "[i]f you have any questions or any of the above referenced items are missing, please contact me." (Id. Ex. B.) Conrad signed the contract on behalf of Plaintiff that same day.

The subcontract agreement states that if the principal contract between Abbonizio and the Authority provides for arbitration, then all claims arising out of the subcontract shall at the sole election of Abbonizio also be decided by arbitration.*fn2 Conrad did not raise any questions or concerns regarding this arbitration clause before signing the contract. (Decl. of Christopher Sullivan ¶¶ 8-10.) The principal contract between the Authority and Abbonizio provides that all "claims, disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof shall be decided by mutual agreement to arbitration in accordance with the Uniform Arbitration Act and the Construction Arbitration Rules of the American Arbitration Association." (Mot. to Compel Ex. B at ¶ 30.)

On December 31, 2009, after Plaintiff completed its work for the project, it submitted an invoice in the amount of $80,831.87 to Abbonizio. The invoice included charges for covered tasks under the subcontract as well as additional charges. Abbonizio responded with a letter refusing payment. Thereafter, Plaintiff again demanded payment from Abbonizio and sent notice to Arch, as the surety, demanding that it pay all amounts owed under the subcontract. To date, Plaintiff has not been paid.

On September 9, 2010, Plaintiff filed this lawsuit against Defendants Abbonizio and Arch making claims for violation of the Pennsylvania Prompt Payment Act, 62 Pa. Cons. Stat. §§ 3931 et seq. (Count I), Breach of Contract (Count II), Unjust Enrichment (Count III), Fraud (Count IV), Negligence/Negligent Misrepresentation (Count V), and Breach of Payment Bond (Count VI). Defendants responded by filing the instant Motion to Compel Arbitration. Plaintiff opposes arbitration.

II. LEGAL STANDARD

Motions to compel arbitration are reviewed under the standard for summary judgment in Federal Rule of Civil Procedure 56(c). Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 159 & n.3 (3d Cir. 2009); Ostroff, 433 F. Supp. 2d at 541. A court will compel arbitration only when there is "no genuine issue of fact concerning the formation of the agreement" to arbitrate. Kirleis, 560 F.3d at 159 (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980)). The court must consider all evidence provided by the party opposing arbitration and draw all reasonable inferences in that party's favor. Ostroff, 433 F. Supp. 2d at 541.

The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 et seq., "establishes a strong federal policy in favor of compelling arbitration over litigation." Sandvik AB v. Advent Int'l Corp., 220 F.3d 99, 104 (3d Cir. 2000). Section 2 is the primary substantive provision of the FAA, declaring that a written agreement to arbitrate "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (citing 9 U.S.C. § 2). Before compelling arbitration, a court must determine (1) whether a valid agreement to arbitrate exists, and (2) whether the particular dispute falls within the scope of that agreement. Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005). Throughout the inquiry, there is a presumption in favor of arbitrability. Id.

In determining whether a valid arbitration agreement exists, courts look to ordinary statelaw principles of contract formation. Kirleis, 560 F.3d at 160; Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 264 (3d Cir. 2003). Thus, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); Harris v. Green Tree Fin. Corp., 183 F.3d 173, 179 (3d Cir. 1999).

III. DISCUSSION

Plaintiff argues that the subject arbitration provision does not compel arbitration for three reasons. (Pl.'s Opp'n 2.) First, the clause does not demonstrate an unequivocal agreement to arbitrate. Second, the clause is unconscionable. Third, the claims against Arch are outside the scope of the provision.

A. Agreement to Arbitrate

Plaintiff argues that its contract with Abbonizio does not demonstrate a mutual agreement to arbitrate. Under Pennsylvania law, contract formation requires: (1) a mutual manifestation of an intention to be bound; (2) terms sufficiently definite to be enforced; and (3) consideration. Blair v. Scott Specialty Gases, 283 F.3d 595, 603 (3d Cir. 2002). The Pennsylvania Supreme Court has held that an arbitration agreement must be "clear and unmistakable" and cannot arise "by implication." Kirleis, 560 F.3d at 161 (quoting Emmaus Mun. Auth. v. Eltz, 204 A.2d 926, 927 (Pa. 1964)). "Before a party to a lawsuit can be ordered to arbitrate and thus be deprived ...


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