Judges Opinions, — April 4, 2018 10:00 — 0 Comments

Gomersall v. Sol-Terra Solar Powered Systems, Adams and Conklin Company, No. 2016-01568

Civil Action-Law-Negligence-Residential Roof-Preliminary Objections-Arbitration Provision-Collateral Estoppel-Agency-Principal Liability

Plaintiff brought suit against Defendant Sol-Terra Solar Powered Systems Inc. (“Sol-Terra”) and Conklin Company, Inc. (“Conklin”) based upon an alleged faulty roof installed at her home by Sol-Terra before the American Arbitration Association (“AAA”) pursuant to a provision in her contract with Sol-Terra that required that disputes be submitted to arbitration rather than court supervised litigation. While Conklin was the manufacturer/supplier of the roof and was named in the suit, the arbitrator dismissed Conklin as a party to the suit because it did not sign the agreement between Plaintiff and Sol-Terra requiring arbitration or voluntarily submit to the jurisdiction of AAA. The arbitrator entered judgment in favor of Plaintiff against Sol-Terra. Plaintiff filed a Complaint in the Lebanon County Court of Common Pleas against Conklin containing causes of action in Breach of Warranty and violation of the Unfair Trade Practices Consumer Protection Law asserting that the arbitration award against Sol-Terra is binding upon Conklin. Conklin filed Preliminary Objections to the Complaint on the basis that it was not a party to the AAA litigation.

1. Under the doctrine of collateral estoppel, parties may be barred from re-litigating issues that already have been decided in a court of law.
2. Collateral estoppel applies if the issue decided in a prior case is identical to the issue presented in the latter case, there was a final judgment on the merits, the party against whom the plea is asserted was a party or in privity with a party in the prior case, the party or person privy to the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding and the determination in the prior proceeding was essential to the judgment.
3. Collateral estoppel does not preclude Conklin from challenging the arbitration award or re-litigating any issues decided by the arbitrator, as it was not a party to the arbitration award and was dismissed as a party by the arbitrator.
4. Collateral estoppel does not bar Plaintiff from seeking relief against Conklin, as the arbitrator never determined whether Sol-Terra was an agent of Conklin.
5. In Pennsylvania, a principal may be held liable for the acts and the conduct of its agent even if the principal neither caused nor participated in the agent’s acts or conduct.
6. A finding of liability of a principal to a third party for the act of an agent must rest on either: (1) express authority, or that which directly is granted; (2) implied authority to do all that is proper, usual and necessary to the exercise of the authority actually granted; (3) apparent authority, as where the principal holds oneself out as an agent by words or conduct; or (4) agency by estoppel.
7. Plaintiff’s Complaint is legally insufficient, as the causes of action are predicated upon the arbitration award and the Complaint fails to set forth independent facts to establish the alleged causes of action against Conklin either directly or as an agent of Sol-Terra.
L.C.C.C.P. No. 2016-01568, Opinion by Bradford H. Charles, Judge, March 7, 2017.

IN THE COURT OF COMMON PLEAS OF
LEBANON COUNTY, PENNSYLVANIA
CIVIL ACTION – LAW NO. 2016-01568

TINA GOMERSALL, Plaintiff
vs.
SOL-TERRA SOLAR POWERED SYSTEMS INC., AARON ADAMS, Individually, and CONKLIN COMPANY INC., Defendants

APPEARANCES:
Denean M. Russo, Esquire For Plaintiff
Anderson Law Offices

James J. Franklin, Esquire For Defendant
Conklin Company, Inc.
Thomas S. Markey, Esquire
McNees, Wallace & Nurick, LLC

OPINION BY CHARLES, J., MARCH 7 , 2017
This case implicates the interplay between court-supervised litigation and proceedings adjudicated via voluntary binding arbitration. In this case, Plaintiff and Sol-terra Solar Powered Systems Inc. (hereafter “SOL-TERRA”) litigated a suit over a leaking roof before the American Arbitration Association (AAA). Plaintiff won. Now, Plaintiff seeks to enforce its victory against Conklin Company Inc. (hereafter,CONKLIN). CONKLIN objects because it was not a part of the AAA litigation. For reasons we will articulate in more detail below, we find that both parties are correct in some respects… and both are also very wrong in others.
I. Facts
In 2013, Plaintiff contacted SOL-TERRA to request the installation of a metal roof on her home. A written contract was signed. (Exhibit 1 to Complaint). The roof was installed in April of 2013. Pursuant to the parties’ contract, Plaintiff paid SOL-TERRA $22,061.45. Shortly thereafter, Plaintiff observed water leakage inside her house. According to the complaint, SOL-TERRA refused to respond. As a result, Plaintiff approached CONKLIN, which was the manufacturer/supplier of the metal roof. CONKLIN indicated that Plaintiff’s roof was not covered under any warranty it provided.
In March of 2016, Plaintiff commenced an arbitration proceeding with AAA pursuant to a provision in its contract with SOL-TERRA that required arbitration instead of court-supervised litigation. Both SOL-TERRA and CONKLIN were included in the claim.1
CONKLIN asked to be dismissed from the AAA arbitration proceeding. CONKLIN pointed out that it did not sign the agreement that required arbitration and that it would not voluntarily submit to the jurisdiction of AAA. On May 31, 2016, the AAA arbitrator declined to decide the case against CONKLIN, concluding that he had no jurisdiction to enter any order against a party who did not voluntarily submit to the jurisdiction of AAA. He retained jurisdiction over SOL-TERRA.
Apparently, SOL-TERRA declined to participate in the AAA proceeding. Nevertheless, an arbitration hearing was conducted and evidence was produced to the arbitrator. Eventually, the AAA arbitrator entered an award in favor of Plaintiff as follows:
• $23,581.45 against SOL-TERRA for breach of contract;
• $70,774.35 against SOL-TERRA under the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”);
• $4,620.00 against SOL-TERRA in counsel fees.
Nothing was awarded by the arbitrator against CONKLIN. In fact, the arbitration award did not even mention CONKLIN.
On October 14, 2016, Plaintiff filed the above–captioned litigation. In addition, Plaintiff filed a Petition to Confirm Arbitration Award against SOL-TERRA. This Court entered an Order on October 21, 2016, confirming the arbitration award against SOL-TERRA in the amount of $76,189.35. Plaintiff’s complaint set forth two causes of action against CONKLIN. Count Two was crafted as a claim for Breach of Warranty. Count Four was a claim under the UTPCPL. In both counts, Plaintiff refers to the arbitration award against SOL-TERRA as “binding” upon CONKLIN.
CONKLIN filed Preliminary Objections on November 30, 2016. Although numerous arguments were proffered, we will today address only the one that challenges Plaintiff’s assertion that the AAA award is “binding” upon CONKLIN 2.
II. Arguments of the Parties
CONKLIN’s argument is relatively simple. CONKLIN points out that it was dismissed from the AAA proceeding, that it was not present when the hearing before the arbitrator occurred, and that the award of arbitrator did not even mention it. CONKLIN asserts that it cannot be “bound” by anything that occurred in the arbitration proceeding. Therefore, CONKLIN asks us to dismiss the complaint filed against it.
Plaintiff’s argument is a bit more nuanced. Plaintiff alleges that SOL-TERRA was the agent of CONKLIN. Because of this agency relationship, Plaintiff alleges that CONKLIN could and perhaps should have come to the defense of SOL-TERRA in the AAA proceeding. Because CONKLIN chose not to do so, Plaintiff alleges that CONKLIN should now be collaterally estopped from challenging what was decided in the AAA arbitration.
III. Doctrine of Collateral Estoppel
Both parties have invoked the concept of Collateral Estoppel, albeit in ways that were sometimes confusing and difficult to understand. As noted above, Plaintiff asserts that CONKLIN should be collaterally estopped from challenging the AAA arbitration award or re-litigating any issues decided by the arbitrator. CONKLIN vehemently opposes this argument and states: “Plaintiff cannot invoke “offensive” Collateral Estoppel to preclude CONKLIN from litigating issues supposedly decided by the award because CONKLIN was not a party to the award.” (CONKLIN’s brief at page 9). Somewhat ironically, CONKLIN then proceeds in its own brief to argue that Plaintiff’s complaint should be dismissed based upon the concept of Collateral Estoppel: “Collateral Estoppel applies here because…AAA decided the agency issue that Plaintiff raises in the complaint.” (CONKLIN’s brief at page 13). To no one’s surprise, Plaintiff argues that the agency question has not yet been decided by any forum. Because the Doctrine of Collateral Estoppel was so vigorously argued by both parties, we will take the time to discuss the concept.
Under the Doctrine of Collateral Estoppel, also referred to as “issue preclusion,” parties may be barred from relitigating issues which have already been decided in a court of law. This restriction is warranted because the judgment in a prior suit precludes relitigation of issues which were necessary to the outcome of the first action. In re Stevenson, 40 A.3d 1212, 1222 (Pa. 2012). Specifically, collateral estoppel applies if (1) the issue decided in the prior case is identical to one presented in the latter case; (2) there was a final judgment on the merits; (3) the party against whom the plea is asserted was a party or in privity with a party in the prior case; (4) the party or person privy to the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding and (5) the determination in the prior proceeding was essential to the judgment. Selective Way Ins. Co. v. Hospitality Grp. Servs., Inc., 119 A.3d 1035, 1042 (Pa. Super. 2015). In order for collateral estoppel to apply, all of the aforementioned elements must be met.
Based upon the above, we conclude that to the extent either party wishes to rely upon the precepts of Collateral Estoppel, such reliance is misplaced. CONKLIN was not a party to the AAA arbitration award. Indeed, CONKLIN was dismissed as a party by an arbitrator who believed that AAA did not enjoy any jurisdiction over CONKLIN. To argue today that CONKLIN could have litigated its claim before the AAA is disingenuous; the reality is that CONKLIN did not. Likewise, to argue that the AAA arbitrator’s decision regarding jurisdiction somehow precludes this court from determining whether SOL-TERRA was an agent of CONKLIN is similarly specious. The reality is that no such decision regarding agency was ever litigated or rendered by AAA.
IV. Viability of Complaint
As we noted in the preamble to this Opinion, we agree in part with the arguments of both parties. Without embroiling ourselves in the esoteric legal arguments of the parties, we conclude that the record clearly establishes the following:
(1) The AAA arbitration award is not binding upon CONKLIN because CONKLIN was not a party to the AAA proceeding;
(2) The issue of whether SOL-TERRA is the agent of CONKLIN has not yet been decided in any forum; and
(3) The complaint as currently drafted does not define the issues; it confuses them.
In the complaint as currently drafted, Plaintiff asserts a cause of action against CONKLIN for Breach of Warranty and violation of the UTPCPL that is predicated almost entirely upon the AAA arbitration award. It’s effort to link CONKLIN to the AAA award is flat-out wrong. Moreover, Plaintiff has not set forth independent facts to establish a Breach of Warranty or a violation of the UTPCPL directly against CONKLIN. As such, both counts alleged by Plaintiff against CONKLIN are legally deficient.
On the other hand, CONKLIN’s complaint does endeavor to paint SOL-TERRA as the agent of CONKLIN. It is hornbook law that liability of an agent can under certain circumstances be imputed to the principal.
In Pennsylvania, a principal may be held liable for the acts and conduct of its agent, even where the principal neither caused nor participated in the agent’s acts or conduct. Aiello v. Ed Saxe Real Estate, Inc., 499 A.2d 282 (Pa. 1985). That finding of liability of a principal to third parties for the act of an agent must rest on either (1) express authority, or that which is directly granted; (2) implied authority, to do all that is proper, usual, and necessary to the exercise of the authority actually granted; (3) apparent authority, as where the principal holds one out as agent by words or conduct, or (4) agency by estoppel. See, e.g., Fiedman v. Kasser, 481 A.2d 886 (Pa. Super. 1984); Apex Financial Corp. v. Decker, 369 A.2d 483, 485 (Pa. Super. 1976); and Joyner v. Harleysville Insurance Company, 574 A.2d 664 (Pa. Super 1990).
Because the issue of agency in this case has yet to be decided by any judicial forum, it remains a viable issue to be litigated. However, Plaintiff’s Complaint as drafted does not include a vicarious liability claim, nor does it even set forth facts that would support an allegation of agency between SOL-TERRA and CONKLIN. If in fact Plaintiff has a cause of action against CONKLIN directly, one will have to be averred. If in fact Plaintiff wishes to establish that SOL-TERRA was an agent of CONKLIN, such a theory will likewise have to be specifically proffered.
We believe that Plaintiff’s complaint must be re-drafted. If Plaintiff wishes to assert direct claims against CONKLIN for Breach of Warranty and violation of the UTPCPL, they should set forth counts and facts supporting this type of direct cause of action. If Plaintiff seeks merely to advance a theory of agency and hold CONKLIN accountable for SOL-TERRA’s conduct, then a specific count for vicarious liability must be propounded and facts must be alleged to establish a theory of agency.
By a Court Order entered simultaneous with this Opinion, we will be sustaining CONKLIN’s Preliminary Objections with leave granted for Plaintiff to re-draft a complaint in order to specifically set forth viable causes of action as outlined above. An Amended Complaint will have to be filed within 30 days. Decisions regarding any other issues raised by CONKLIN will be deferred until after the amended complaint has been proffered.

1 Also sued was Aaron Adams, who is alleged to be the owner of SOL-TERRA. In the arbitration proceeding, Plaintiff asked the arbitrator to pierce the corporate veil as it related to Mr. Adams. The arbitrator declined to do so.

2 Because of the nature of our decision today, it is not necessary to address all of CONKLIN’s other arguments.

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