PENNSYLVANIA ARBITRATION AND MEDIATION LAWS
By: Bryan C Roth, Law Student – Widener University School of Law (ADR Seminar-2001)Prepared:November 26, 2001
The Pennsylvania Uniform Arbitration Act (2001)
Civil cases meeting specific criteria in the state of Pennsylvania are subject to mandatory arbitration as provided within the states Uniform Arbitration Act (amended in 2001). The act effectively spells out the procedural criteria for arbitration in state courts, the eligible cases, and the methods for granting awards and appeals. The Act applies only to state, not federal courts. The Uniform Arbitration Act is broken into three parts: subchapter A: Statutory Arbitration, subchapter B: Common Law Arbitration and subchapter C: Judicial (Compulsory) arbitration. All sections of the Act are subject to local jurisdictional rules and procedures.
SUBCHAPTER A: Statutory Arbitration. 42 Pa. C.S. Sec. 7302 outlines the scope of subchapter A. The general rule for Statutory Arbitration provides that an agreement to arbitrate is presumed to be pursuant to subchapter B (common law arbitration) unless the arbitration agreement is in writing and expressly provides for arbitration pursuant to subchapter A, or there is a statute requiring the use of subchapter A. There are several exceptions and special applications to the general rule for statutory arbitration in which its provisions shall be utilized as a matter of law. The first exception listed in Sec 7302 (B) are Collective Bargaining Agreements to arbitrate controversies between employees and employers, only where this subchapter is consistent with any statute regulating labor and management relations. The second exception listed in Sec. 7302 (C) are government contracts where a government unit of the commonwealth is a party and the contract provides for arbitration, but does not specify any statutory provision. Finally Sec 7302 (D) provides special application of statutory arbitration involving Sec 7302 (B) where 1) the commonwealth government submits a controversy to arbitration (including any political subdivision) and 2) where this paragraph is applicable, a court reviewing the arbitration award shall modify or correct the award where the award is contrary to law in the same manner as if it had been granted by a jury. Sec 7303 provides that any written agreement to submit a controversy to arbitrate pursuant to statutory arbitration is presumed to be valid, enforceable and irrevocable, barring any grounds that exist in law or equity that allow for the revocation of the agreement. Sec 7304 provides the court procedures to compel or stay statutory arbitration. Sec 7304 (A) states that in order to compel arbitration, the objecting party must show the existence of an agreement to arbitrate pursuant to Sec 7303 and the court shall proceed summarily to determine the existence and validity of any such agreement. The same procedures exist under Sec 7304 (B) in order to stay an arbitration proceeding. Sec 7304 (C), (D) and (E) provide the procedure for Venue, Stay of Judicial Proceeding and Examination of Merits where there are proceedings to compel or stay arbitration. Sec. 7305 and 7306 describe the means of appointing arbitrators and the actions by arbitrators. If the agreement to arbitrate proscribes a method for the appointment of arbitrators, that method shall be followed. Otherwise, the court on application of a party shall appoint one or more arbitrators. An arbitrator appointed by the court shall have all the powers of an arbitrator specifically named in the agreement. All actions taken by a number of arbitrators shall be exercised by a majority agreement, unless otherwise prescribed by an agreement. Sec 7307 states the general rule for the hearing before the arbitrator(s). Sec. 7307 (1) holds that the arbitrators shall appoint the time and place of the arbitration hearing by notice sent by registered mail no less than 10 days prior to the hearing date. Appearance at the hearing constitutes a waiver of such notice. Another interesting provision of Sec 7307 is item (3) which holds that the arbitrator may hear and determine the controversy upon the evidence produced notwithstanding the failure of a duly notified party to appear. Sec 7307 (4) and (5) state that during the arbitration proceedings the parties and their attorney’s have the right to be heard, to present material evidence, to cross-examine witnesses and a majority of the arbitrators may determine any issue and render a final reward. Sec 7308 provides that any party to the controversy has a right to be represented by an attorney at the arbitration proceeding. Under Sec. 7309 Arbitrators may issue subpoenas for the attendance of any witness and for the production of material evidence. The arbitrator may allow for the taking and use of a deposition of any witness who cannot be served with a subpoena or is unable to attend the hearing. The arbitrators are granted the power to administer oaths and all provisions of law compelling a person under subpoena to testify are applicable. Under Sec. 7310 the general rule for the award of the arbitration provides that it shall be in writing and signed by all arbitrators joining in the award. Each party shall receive a copy of the award through certified or registered mail. The award shall be made within the time fixed be agreement of the parties or within such time as is ordered by the court. The expenses (not including counsel fees) incurred during the conduct of the arbitration proceedings shall be paid as prescribed in the award (Sec 7312) Confirmation of the arbitrators award by the court shall take place barring a timely motion is filed upon grounds urging the award to be vacated, modified or corrected in a timely manner (Sec 7313). Sec. 7314 states the general rule for vacating the award by the court. On application of a party the court shall vacate an arbitrators award where 1) the court would vacate the award under common law arbitration (sec 7341) 2) there was evidence of partiality, corruption or misconduct by the arbitrator, 3) the arbitrators exceeded their powers 4) the arbitrators refused to postpone the hearing upon a showing of good cause or refused to hear evidence material to the controversy, 5) there was no agreement to arbitrate the issue and the issue of the existence of such an agreement was not determined in proceeding provided for in Sec 7304. Sec 7314 holds the notable exception that the relief awarded by the arbitrators was such that it would/could not be awarded by a court of law or equity is not a ground for vacating or refusing to confirm an award. If the court vacates the award (for reasons other than item 5) the may order a rehearing before new arbitrators. If an application to vacate the award is denied and no application to modify or correct is pending, the court shall confirm the award (Sec 7314). Modification or correction of the arbitrator’s award is provided for under Sec. 7315. The general rule notes that on application to the court made within 30 days of delivery of the award, the court shall modify or correct the award where: 1) there was a miscalculation of the figures or a mistake in the description of any person, thing or property referred to in the award; 2) the arbitrator awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision; 3) the award is deficient in a matter of form, not affecting the merits of the decision upon the issues submitted. If the application to modify or correct is received, the court shall modify or correct so as to effect its intent. Otherwise the court shall confirm the award as made by the arbitrator. Pursuant to Sec. 7316, if the court award is confirmed, modified or corrected it shall be entered with a judgment or decree of the court in conformity with the order. Section 7317 states that an application to the court for any reason under statutory arbitration shall be by petition in the manner proscribed by law for the making and hearing of petitions in civil matters. Notice of the applications shall be served in a the manner proscribed by law for the service of a writ of summons in a civil action. Venue for court proceedings are described in section 7319 as: 1) an initial application to the court shall be made to the court of the county in which the agreement prescribes that the arbitration hearing shall be held; 2) If item (1) does not apply, the application shall be made to the court in the county where the adverse party resides, or if not a resident of the commonwealth, then to the court of any county; 3) all subsequent applications shall be made to the court hearing the initial application unless the court otherwise directs Finally, sec. 7320 provides the manner of appeal from a court order. The general rule states that an appeal may be taken from: 1) a court order denying an application to compel or stay arbitration pursuant to sec. 7304; 2) a court order confirming or denying confirmation of an award; 3) a court order confirming or correcting an award; 4) a court order vacating an award without directing a rehearing; 5) a final judgment or decree of the court entered pursuant to the provisions of this subchapter. The procedure for such appeal shall be taken in the manner, within the time and to the same extent as an appeal from a final order of court in a civil action. Subchapter A: Case Law There have been several notable recent cases in which subchapter A of the Uniform Arbitration Act has been litigated including the following. In Heist v. Keystone Insurance Co. the primary issue involved what is the proper standard of review for an arbitration decision appealed from a subchapter A statutory arbitration award. Heist v. Keystone Insurance Co. 36 Pa. D & C 4th 275 (1997). Defendant Keystone appealed an arbitrators award of $100,000 in damages resulting from an under insured motorists claim. On appeal, Keystone argued that the arbitrators had exceeded their jurisdiction in granting that award and that the proper standard of review should be an “error of law” standard. The court ruled that an “error of law” standard of review only applied to cases where the Commonwealth or its subdivision was a party or where the parties were required to submit to arbitration as a matter of law. Here, the parties agreed in writing for arbitration under the Pennsylvania Uniform Arbitration Act and therefore the proper standard of review was one of “fraud” in which fraud or irregularities in the arbitration process must be shown. Heist 36 at 275-280. In Sherman v. Amica Mutual Insurance Company, the question regarding when an arbitration order can be vacated, pursuant to statutory arbitration, was settled. Sherman v. Amica Mutual Insurance Company 2001 PA Super 241 (2001). The court held that Sec 7302 allowed a decision contrary to law to be vacated in only two narrow circumstances; 1) an agreement prior to the enactment of the Uniform Arbitration Act or 2) an agreement expressly providing for arbitration pursuant to the 1927 Statutory Arbitration Act. Otherwise, Sec 7315 prevails when it states that a trial court is not permitted to vacate, modify, or amend an arbitration award for being contrary to law. Sherman 2001 at 247Pennsylvania Rules of Civil Procedure: Compulsory Arbitration.
Sec 7361 (C) gives the general procedural guidelines for compulsory arbitration as those which shall proceed in such a manner as proscribed by general rules. Those general rules can be found in the Pennsylvania Rules of Civil Procedure, Rules 1301 to 1314 (Compulsory Arbitration). Rule 1301 of Pennsylvania Rules of Civil Procedure illustrates this in its general scope stating “These rules apply to actions which are submitted to compulsory arbitration pursuant to local rule under Section 7361 of the Judicial Code, 42 Pa. C.S. Sec 7361. Rule 1302 states the criteria for forming the list of potential arbitrators. 1302 states a list of available arbitrators shall be prepared in a manner prescribed by local rule. The list shall consist of a sufficient number of members of the bar actively engaged in the practice of law primarily in the judicial district in which the court is situated. The board of arbitration shall consist of three members of the bar appointed from the list and the board shall be chaired by a member of the bar admitted to the practice of law for at least three years. Not more than one member or associate of the same firm or association of attorneys shall be appointed to the same board. Any member of the board who would be disqualified for any reason that would disqualify a judge under the Code of Judicial Ethics, shall immediately withdraw as an arbitrator.According to Rule 1309, an appeal by any party shall be deemed an appeal by all parties as to all issues unless otherwise stipulated in writing by all parties. No appeal may be discontinued except by leave of court after notice to all parties or upon the filing of the written consent of all parties (Rule 1310). On appeal the trial shall be de novo and an arbitrator may not be called to testify as to what transpired before the arbitrators. (Rule 1311).
SUBCHAPTER C: Case Law In the Superior Courts 1989 decision in McGonigle v. Currence, the court ruled that the failure to attend compulsory arbitration hearing pursuant to subchapter C does not forfeit ones right to appeal to a trial de novo. McGonigle v. Currence, 387 Pa. Super. 511, 515 (1989). The court stated that pursuant to Sec. 7361 and Rule 1303, an appellant’s right to appeal an arbitration award is not conditioned upon appellant’s appearance at the arbitration hearing. Because the appellants complied with all necessary steps to perfect their appeal, their failure to appear at the arbitration hearing in no way was a waiver of their right to trial de novo. McGonigle 387 at 515. The Superior Court in Rosenberg v. Monteverde & Hemphill did illustrate that the right to appeal trial de novo from a compulsory arbitration hearing is not universal. Rosenberg v. Monteverde & Hemphill, 688 A.2d 1210 (1997) In that case the court denied the appellants motion to appeal trail de novo and upheld a contractual agreement the appellant had made with the appellee to refrain from appealing the award. The court found that the trial court did not abuse it’s discretion in upholding the agreement to allow the arbitrators decision to be binding. Rosenberg 688 at 1213.ADR In The Eastern District of Pennsylvania
The federal court system in the commonwealth of Pennsylvania subscribes to a different format of arbitration and mediation separate from the state courts. The Eastern District court of Pennsylvania is one of ten district courts nationally authorized by 28 U.S.C. Sec. 651-658 to provide mandatory, non-binding court-annexed arbitration in cases involving money damages only of $100,000 or less. Referral to arbitration, which is automatic by case type, is generally made after the answer is filed. A panel of three arbitrators hears presentations by each party and makes a ruling, which becomes binding, unless the parties request a trial de novo. Arbitrators are not permitted to discuss settlement with the parties or their counsel or to participate in any settlement discussions concerning the case. The fee of $100 per arbitrator per case is paid by the court. Local Rule 53.2 governs the program, which was established in 1978.Case Selection in
EDPA Arbitration
Eligible
cases are those in which money damages of $100,000 or less are sought,
excluding the following case types: Social Security appeals, cases in which a
prisoner is a party, cases involving violation of a constitutional right and
actions in which jurisdiction is based in whole or in part on 28 U.S.C. Sec
1343. All eligible cases are automatically referred to arbitration after an
answer is filed. The assigned judge may exempt
the case from arbitration on grounds that it involves complex legal
issues, legal issues predominate over factual issues, or for other good cause.
Scheduling of EDPA
Arbitration
After
an answer is filed, the arbitration clerk sends parties notice of referral,
including the date and time of the arbitration hearing. Other case activities
must go forward during the arbitration referral. Parties have ninety days from
the date the answer is filed to complete discovery, unless the assigned judge
specifies otherwise.
The
arbitration hearing is held within 120 days of the filing of the answer. Thirty
days before the hearing date, the assigned judge issues an order setting the
date and time of the hearing and the names of the arbitrators. Arbitration
hearings are arranged by court staff and are held at the court house.
Arbitration sessions generally last one day, but can range from a half day to
several days. Parties must attend the arbitration hearing. If a party fails to
participate in the hearing in a meaningful way, the court may impose sanctions,
including striking the demand for trial de novo by that party.
Within
thirty days of entering the arbitration award on the docket, any party may
request a trial de novo. When a party makes a demand for trial de novo, it
must, unless permitted to proceed in forma pauperis, deposit with the clerk a
sum equal to the arbitration fees of $100 for each arbitrator. The sum is
returned to the party if it obtains a final judgment more favorable then the
arbitration award. If the party does not obtain a more favorable judgment, the
sum is forfeited. The arbitration hearing is confidential, and no evidence of
the hearing may be introduced at a trial de novo.
Arbitrators Qualifications in EDPA Arbitration
An arbitrator must be a member of the bar for at least five years, admitted to practice in the district, and determined by the chief judge to be competent. No training is required. The court randomly assigns three arbitrators from the court’s roster: one plaintiff’s attorney, one defense attorney, and one attorney who specializes in neither area. Arbitrators must disqualify themselves for bias or prejudice as provided in 28 U.S.C. Sec. 144 and in any action in which they would be required under 28 U.S.C. Sec. 455 to disqualify themselves if they were a justice, judge or magistrate judge. The court believes that arbitrators have judicial immunity. The court pays each arbitrator $100 per case and arbitrators are not reimbursed for actual expenses incurred in the performance of their duties.Mediation in the Eastern District of Pennsylvania
In the Eastern District of Pennsylvania Local Rule 53.2.1 authorizes a mandatory early mediation program. Since January 1, 1991 all civil cases assigned odd civil action numbers have been required to participate in mediation conferences conducted by an attorney-mediator early in the litigation process, except Social Security cases, cases in which a prisoner is a party, cases eligible for arbitration, asbestos cases or any case a judge determines is not suitable for mediation. The mediation process is a facilitated negotiation process and is provided pro bono by attorney’s selected from the court’s roster of neutrals.Scheduling Mediation Cases in EDPA
After the first appearance by the defendant, the court’s mediation clerk sends notice to counsel and any unrepresented party setting the date, time and location of the mediation conference and the name, address and telephone number of the mediator. When the notice of mediation is mailed to the parties, the mediation clerk mails the mediator copies of the complaint and any motions or pleadings filed to date. At least three days before the mediation sessions, each party must give the mediator and other parties a memorandum no longer than two pages, summarizing the nature of the case and the party’s position on the issues, the relief sought, and settlement. The mediation conference is held within sixty days of the first appearance by the defendant. Court staff schedule the mediation hearing, which is generally held at the court house. Mediation sessions generally last one hour, and only one session is usually held.Mediation Program Features in EDPA
All discovery and other motions of the case go forward during the mediation process. Counsel primarily responsible for the case and each unrepresented party must attend the mediation conference. Counsel must arrange for their clients to be available by telephone or in person to discuss settlement. Willful failure to attend or be available is reported to the court and may result in sanctions. If no settlement is reached, the mediator files a statement with the mediation clerk and the assigned judge that the parties have complied with the requirements of the process but have not reached settlement. If settlement is achieved, the mediator files a report with the mediation clerk and the assigned judge stating that a settlement was reached. All proceedings at a mediation conference are confidential and may not be reported. No party is bound to anything done or said at the mediation conference unless a written settlement is reached and signed by parties and counsel.Mediators Qualifications in the EDPA
Those listed on the court’s roster must be members of the bar for at least fifteen years, admitted to practice before the court, and determined by the chief judge to be competent. There is no training requirement for the court appointed mediators. The clerk or other court staff randomly selects a mediator from the court’s roster. The court believes the mediators have judicial immunity because they are assisting the court in performing its judicial functions. The mediators are attorney’s who serve pro bono for their services during the mediation.Mediation in the Middle District of Pennsylvania
The middle district of Pennsylvania does not feature any mandatory arbitration program, but it does feature a mediation program established in January of 1994. Under the program, every civil case is eligible for mediation, although prisoner and pro se cases are usually not considered. Referrals are made by assigned judges on a case by case basis. Party consent is not required for the program and the process is confidential and provided pro bono.Scheduling Mediation in the MDPA
The mediation referral is usually made shortly after the parties have completed discovery. An order of referral is entered by the assigned judge setting the date, time and place for the mediation session and appointing a mediator. The mediation session should take place within thirty days of the date of the order of referral. The mediator is authorized to change the date and time for the mediation session, provided the new date is within fifteen days of the date set in the order of referral. The duration and number of the mediation sessions vary with the case and the mediator.Mediation Program Features in MDPA
Discovery, motions and all other case activities are suspended during the mediation process. Counsel and any unrepresented parties must attend the sessions unless permitted by the mediator to attend by telephone. Parties must be prepared to discuss all liability and damage issues, all equitable and declaratory remedies requested, and their settlement positions. The mediator submits a statement to the assigned judge indicating whether the court’s mediation requirements have been met and whether settlement was reached. Information from the mediation sessions may not be used by any adverse party for any reason in litigation.Mediators Qualifications in MDPA
The mediator is randomly selected by the clerk of the court from the roster established by the court. The chief judge certifies neutrals as necessary. Requirements to be certified include membership to the bar of the highest court of one’s state for ten years, admission to practice in the district, determination by the chief judge of competence to serve as a mediator, and successful completion of the two-day mediation training session sponsored by Dickinson Law School. All mediators serve without compensation.ARBITRATION IN THE WESTERN DISTRICT OF PENNSYLVANIA
Like the states Eastern District, the Western District is one of ten federal district courts authorized by 28 U.S.C. Sec. 651-658 to offer voluntary, non-binding court-annexed arbitration to civil litigants. The primary difference lies in the opt-out system employed in the Western District. Any party to a civil dispute may opt out of the referral to arbitration for any reason. Other difference between the Western District’s Arbitration program and that offered in the Eastern District, revolve mostly around the qualification of potential arbitrators. To be eligible for appointment to the court’s roster, an attorney must have been admitted to practice for at least ten years, be admitted in this district or be a member of the faculty of an accredited Pennsylvania Law School, be recommended by the court’s committee on arbitration, and be determined by the chief judge competent to perform the duties of an arbitrator. The parties may elect to proceed before a single arbitrator or a panel of three arbitrators and may select their arbitrators. If the parties are unable to agree on arbitrators from the courts roster, the arbitration clerk randomly selects the arbitrators from the court’s rosters. To use arbitrators not certified by the court, approval of the chief judge is required. The court pays the arbitrator’s fees which run $250 pen day for a single arbitrator or $100 per day for each arbitrator in a panel of three.NEUTRAL EVALUATION IN WESTERN PENNSYLVANIA
On January 1, 1995 the Western District of Pennsylvania instituted a nuetral evaluation process for civil cases. Under Local Rule 16.3, cases are referred to this non-binding ADR process on a case-by-case basis by the assigned judge or by motion of the parties. The sessions are conducted by volunteer lawyers called adjunct settlement judges who have expertise in the subject matter of the dispute. The primary reason for the neutral evaluation process is to give the parties an opportunity to articulate their positions, to hear their opponents version of the matters in dispute, and to receive a neutral assessment of their relative strengths and of the opposing positions. All civil cases are eligible for the program.Scheduling Neutral Evaluation in WDPA
A case may be referred to the process at any appropriate time. After the referral order is entered, counsel are notified of the adjunct settlement judge appointed in the case and the date of the submission. The date of the evaluation session is set by the assigned judge in the referral order. The session may be rescheduled by the adjunct settlement judge to take place within fifteen days of the original date. Other changes in dates must be approved by the assigned judge. The session may be held at the court house or at another location agreeable to the adjunct settlement judge and the parties.Neutral Evaluation Program Features in WDPA
Counsel and clients are required to attend the session unless excused for good cause by the adjunct settlement judge. In litigation involving a corporation, a settlement-empowered representative of the party must attend the session. Willful failure to attend will result in sanctions. The adjunct settlement judge must send a report to the clerk and the assigned judge indicating that there has been compliance with the requirements of the rule and noting whether or not settlement has been reached. The evaluation session is confidential and all information from the settlement event is shielded from the trial judge. Other than the brief report filed at the sessions conclusion, communication between the adjunct settlement judge and the assigned judge is prohibited. All proceedings may not be reported or recorded or disclosed to the trial judge. All communications from the sessions may not be disclosed to anyone not involved in the litigation and may not be used for any purpose (including impeachment) in the litigation or in any other proceedings.