FINN v. THE EXECUTOR/EXECUTRIX/ADMINISTRATOR OF THE ESTATE OF GENNARO ("JERRY") R. SCHIAVO, JR., et al
OPINION. Signed by Judge Noel L. Hillman on 2/11/2016. (TH, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
THOMAS P. FINN,
ADMINISTRATOR OF THE ESTATE
OF GENNARO (“JERRY”) R.
SCHIAVO, JR. and SHARON
Civil No. 15-2409
Joseph D. Cronin
Cronin Law Firm LLC
1500 John F. Kennedy Boulevard
Philadelphia, PA 19102
Counsel for Plaintiff
Jonathan A. Cass
Cohen, Seglias, Pallas, Greenhall & Furman
United Plaza, 19th Floor
30 S. 17th Street
Philadelphia, PA 19103
Counsel for Defendants
HILLMAN, District Judge:
This matter comes before the Court by way of motion [Doc.
No. 9] of Defendants, the Executor/Executrix/Administrator of
the Estate of Gennaro (“Jerry”) Schiavo, Jr. and Sharon Schiavo,
seeking to dismiss Plaintiff Thomas P. Finn’s Second Amended
Complaint and compel arbitration based upon an agreement
executed in 2003 by Jerry Schiavo and Plaintiff.
further seek to dismiss, with prejudice, all claims against
Sharon Schiavo for failure to assert cognizable causes of
The Court has considered the submissions of the parties and
decides this matter pursuant to Fed. R. Civ. P. 78.
reasons expressed below, Defendants’ motion to dismiss and
compel arbitration will be granted as to the Estate.
Plaintiff’s claims against Sharon Schiavo will be stayed pending
the outcome of arbitration because the claims against her are
intertwined with Plaintiff’s arbitrable claims against the
The Court exercises jurisdiction pursuant to 28 U.S.C. §
1332, based on diversity of citizenship.
Plaintiff is a citizen
of the Commonwealth of Pennsylvania, and Defendants are citizens
of the State of New Jersey.
The amount in controversy exceeds
In December 2002, Jerry Schiavo and Plaintiff formed TempRite, LLC, a Pennsylvania limited liability company that
provided mechanical contracting, air conditioning, refrigeration
and heating sales, repairs, maintenance and services to
customers throughout Pennsylvania and Southern New Jersey.
Jerry Schiavo and Plaintiff were the only two members of TempRite, and had equal 50% ownership interests.
primarily focused on providing services and installation.
Schiavo was responsible for all financial decisions and
distributions, focusing on the business aspect of Temp-Rite.
Jerry Schiavo’s wife, Sharon Schiavo, worked for Temp-Rite as
the company’s Operations Manager and bookkeeper.
On January 15, 2003, Jerry Schiavo and Plaintiff executed
the “Operating Agreement of Temp-Rite, LLC” (“Agreement”) [Doc.
No. 9-1], which governed the operations of Temp-Rite.1
to the Agreement, the business and internal affairs of Temp-Rite
were to be governed by the laws of the Commonwealth of
(Agreement ¶¶ 1.10, 15.3.)
included an arbitration provision.
The Agreement also
(Id. ¶ 14.1.)
Plaintiff alleges that in August 2014, Plaintiff discovered
While it appears Plaintiff intended to attach the Agreement to
his Second Amended Complaint it is not present in his filings
[Doc. No. 8]. A court in reviewing a Rule 12(b)(6) motion must
only consider the facts alleged in the pleadings, the documents
attached thereto as exhibits, and matters of judicial notice. S.
Cross Overseas Agencies, Inc. v. Kwong Shipping Grp. Ltd., 181
F.3d 410, 426 (3d Cir. 1999). A court may consider, however,
“an undisputedly authentic document that a defendant attaches as
an exhibit to a motion to dismiss if the plaintiff's claims are
based on the document.” Pension Benefit Guar. Corp. v. White
Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). The
parties do not dispute the Agreement’s authenticity and
Plaintiff’s claims are based on the Agreement; the Court will
therefore consider the Agreement at issue.
that Jerry Schiavo had been stealing from Temp-Rite and
Plaintiff for years by expending Temp-Rite funds for Defendants’
Plaintiff further alleges that Sharon Schiavo
conspired with and aided and abetted Jerry Schiavo in these acts
by misappropriating Temp-Rite’s funds for personal use,
misrepresenting to Plaintiff the financial health of Temp-Rite,
and denying Plaintiff access to the company’s financial
On February 7, 2015, Jerry Schiavo died due to
On April 6, 2015, Plaintiff filed the present suit.
July 17, 2015, Plaintiff filed his Second Amended Complaint,
alleging: (1) breach of contract against the Estate; (2) civil
conspiracy to commit breach of contract against Sharon Schiavo;
(3) fraud against all Defendants; (4) breach of fiduciary duty
against the Estate; (5) aiding and abetting breach of fiduciary
duty against Sharon Schiavo; (6) conversion against all
Defendants; (7) unjust enrichment against all Defendants; and
(8) demand for accounting against the Estate.
III. STANDARDS OF REVIEW
A. Motion to Compel Arbitration
The Third Circuit recently clarified what standard of law
applies when evaluating motions to compel arbitration.
In Guidotti v. Legal Helpers Debt Resolution, 716 F.3d 764, 771
(3d Cir. 2013), the Third Circuit held that, “‘[w]here the
affirmative defense of arbitrability of claims is apparent on
the face or a complaint (or ... documents relied upon in the
complaint),’ ‘the [Federal Arbitration Act] would favor
resolving a motion to compel arbitration under a motion to
dismiss standard without the inherent delay of discovery[.]’”
Id. at 773–74 (internal citations omitted).
arbitrability is not apparent on the face of the complaint, then
further development of the factual record is necessary and the
motion should be decided under the summary judgment standard.
Id. at 774.
Moreover, if the complaint and incorporated
documents facially establish arbitrability but the non-moving
party comes forward with enough evidence to question the
parties’ intentions concerning arbitration, the motion to compel
arbitration should be decided under the summary judgment
Here, the affirmative defense of arbitrability is apparent
on the face of the complaint which repeatedly refers to the
Accordingly, the motion to compel arbitration must
be decided on a motion to dismiss, or Rule 12(b)(6) standard.
When considering a motion to dismiss a complaint for
failure to state a claim upon which relief can be granted
pursuant to Rule 12(b)(6), a court must accept all well-pleaded
allegations in the complaint as true and view them in light most
favorable to the plaintiff.
Evancho v. Fisher, 423 F .3d 347,
350 (3d Cir. 2005).
It is well settled that a pleading is
sufficient if it contains “a short and plaint statement of the
claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a)(2).
A district court, in weighing a motion to dismiss, asks
“‘not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 n.8
(2007) (quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974));
see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1935 (2009) (“Our
decision in Twombly expounded on the pleading standard for ‘all
civil actions[.]’” (citation omitted)). First,
Twombly/Iqbal standard, a “district court must accept all of the
complaint's well-pleaded facts as true, but may disregard any
Fowler v. UPMC Shadyside, 578 F.3d 203,
210–211 (3d Cir. 2009) (citing Iqbal, 129 S.Ct. at 1950).
Second, a district court “must then determine whether the facts
alleged in the complaint are sufficient to show that the
plaintiff has a ‘plausible claim for relief.’”
(quoting Iqbal, 129 S.Ct. at 1950).
Id. at 211
“[A] complaint must do more
than allege the plaintiff's entitlement to relief.”
defendant bears the burden of showing that no claim has been
Hedges v. U.S., 404 F .3d 744, 750 (3d Cir. 2005).
B. Choice of Law
In diversity cases, federal courts apply the forum state's
choice of law rules to determine which state’s substantive laws
Maniscalco v. Brother Int'l (USA) Corp., 709
F.3d 202, 206 (3d Cir. 2013) (citing Klaxon Co. v. Stentor Elec.
Mfg. Co., Inc., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477
In this case, the choice of law rules of New Jersey
Under New Jersey law, a choice of law provision will be
honored unless: (1) the state chosen has no substantial
relationship to the parties or the transaction; or (2)
application of the law chosen would conflict with a fundamental
public policy of a state having a greater interest in a
determination of a particular issue and such state would be
applicable in the absence of the choice of law provision under
the governmental-interest analysis.
Prudential Ins. Co. of Am.
v. Nelson, 11 F. Supp. 2d 572, 578 (D.N.J. 1998).
Choice of Law
As a preliminary matter, the Court will first analyze what
state law to apply in this case.
The parties’ Operating
Agreement contains a choice of law provision at Article 15.3
This Agreement shall be governed exclusively by the
laws of the Commonwealth of Pennsylvania and shall be
construed in accordance with the laws of the
Commonwealth of Pennsylvania.
(Agreement ¶ 15.3.)
Accordingly, the Court must determine
whether the parties have a substantial relationship with
Pennsylvania and whether the application of Pennsylvania law
will conflict with a fundamental public policy of a state having
a greater interest in the litigation.
The Court is satisfied that the laws of Pennsylvania, as
selected in the parties’ forum selection clause, should be
applied to Plaintiff’s claims.
The parties have a substantial
relationship with Pennsylvania because Temp-Rite is a
Pennsylvania limited liability company, Plaintiff is a citizen
of the Commonwealth of Pennsylvania, and Temp-Rite provided
services to residential customers throughout Pennsylvania.
(Second Am. Compl. ¶¶ 1, 9).
Additionally, it does not appear
that any state has a greater interest in the litigation.
Accordingly, the Court will apply Pennsylvania law.
It is generally recognized that arbitration is “a matter of
contract between the parties.”
First Options of Chicago, Inc.
v. Kaplan (“First Options”), 514 U.S. 938, 943 (1995).
Consequently, while it is true that the Federal Arbitration Act
(FAA) establishes a policy favoring the liberal construction of
arbitration agreements and the resolution of any doubts in favor
of arbitration, the court must also find that the parties have
actually agreed to submit to arbitration for any particular
See Granite Rock Co. v. International Broth. of
Teamsters, 561 U.S. 287, 299 (2010).
“Although the FAA applies
to both state and federal judicial proceedings, state contractlaw principles generally govern a determination whether a valid
agreement to arbitrate exists.”
Hojnowski v. Vans Skate Park,
187 N.J. 323, 342, 901 A.2d 381 (2006).
Whether the parties have agreed to arbitrate their disputes
is reserved for judicial determination unless the parties have
clearly indicated otherwise.
Puleo v. Chase Bank USA, N.A., 605
F.3d 172, 178 (3d Cir. 2009).
In making this determination, a
court must “inquire into (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).
As a general
policy, “an order to arbitrate the particular grievance should
not be denied unless it may be said with positive assurance that
the arbitration clause is not susceptible of an interpretation
that covers the dispute.”
Century Indem. Co. v. Certain
Underwriters at Lloyd's, London, subscribing to Retrocessional
Agreement Nos. 950548, 950549, 950646, 584 F.3d 513, 555 (3d
Cir. 2009) (citing AT&T Techs., Inc. v. Communications Workers
of Am., 475 U.S. 643, 650 (1986)).
1. Whether a Valid Agreement to Arbitrate Exists
The Court first considers whether a valid agreement to
Plaintiff argues there is no valid agreement
to arbitrate because (1) Jerry Schiavo is deceased, and (2) if
he had not died, he would have been expelled for material
First, the fact that Jerry Schiavo is deceased does not
affect the Agreement’s validity.
The estate of a deceased party
to an arbitration agreement is bound by the agreement entered
Peltz ex rel. Estate of Peltz v. Sears, Roebuck & Co.,
367 F. Supp. 2d 711, 718 (E.D. Pa. 2005).
the estate stands in the shoes of Jerry Schiavo to compel
Id. (citing Harvey v. Hassinger, 461 A.2d 814, 816
Further, the Agreement provides that, “[the]
Agreement shall bind the parties thereto as well as their
successors, assigns, heirs, and estates.”
(Agreement ¶ 15.12.)
Second, at that time of his death Jerry Schiavo was not
disassociated from the company, and even if he was, a valid
agreement still exists in this case.
provision of the parties’ Agreement provides:
Definition of member disassociation. The
disassociation of a member means the termination of
the member’s right to participate in the LLC’s
business and internal affairs by voting on LLC
matters, by acting as an agent for the LLC or
(Agreement ¶ 6.1.)
Events of disassociation include when a
member dies or is expelled from the company.
“While an agreement to arbitrate does not usually continue
in effect after the underlying contract expires, a provision
relating to dispute resolution may, in some instances, survive
the expiration of the contract.”
Townsend v. Pinnacle Entm't,
Inc., 457 F. App'x 205, 209 (3d Cir. 2012) (citing Litton Fin.
Printing Div. v. NLRB, 501 U.S. 190, 208, 111 S.Ct. 2215, 115
L.Ed.2d 177 (1991); Luden's Inc. v. Local Union No. 6 of Bakery,
Confectionery & Tobacco Workers Int'l Union, 28 F.3d 347, 363–64
(3d Cir. 1994)).
In Townsend, the Third Circuit found that
where an arbitration clause provides that the agreement to
arbitrate survives the expiration of the agreement, that
agreement should be enforced under the FAA.
457 Fed. Appx. at
209; see also Sniger v. CVTech Grp., Inc., No. 11-6130, 2012 WL
4490782, at *5 (D.N.J. Sept. 26, 2012) (same).
the parties’ Agreement explicitly provides that: “Rights, duties
and liabilities accrued by the parties under this Agreement
before its termination shall continue in full force and effect
after its termination.”
(Agreement ¶ 13.2.)
Therefore, even if
Jerry Schiavo was disassociated from the company at the time of
his death, which he was not, he would still be bound by the
2. Whether the Particular Dispute Falls within the Scope of
The Court next turns to whether Plaintiff’s claims fall
within the scope of the parties’ Agreement.
that they do.
The Court finds
The parties’ Agreement included an arbitration
provision which provides: “Any dispute between or among the
parties relating to Arbitrable Matters . . . shall be
exclusively and finally resolved by arbitration by a single
(Agreement ¶ 14.1.)
The Agreement defines
“Arbitrable Matters” as: (1) “how to construe and enforce the
provisions [regarding arbitration of LLC disputes]”; (2)
“whether the purchase price or the other terms of purchase of a
member’s LLC interest pursuant to the terms of this Agreement is
fair to the LLC and to the members”; (3) “any claim by a member
in the member’s capacity as a member against any other member in
that other member’s capacity as a member”; and (4) “any other
matter that, in the Arbitrator’s view, is appropriate for
(Id. ¶ 14.2.)
The Agreement explicitly defines issues concerning the
scope of the arbitration provision and claims by a LLC member
against another member in their respective capacities as
(Agreement ¶ 14.2.)
These provisions are
They evidence the intent of the parties to
arbitrate all disputes defined as “Arbitrable Matters” arising
out of the business relationship between Plaintiff and Jerry
Further, all of Plaintiff’s claims arise from the
relationships and obligations set forth in the Agreement.
Accordingly, the Court finds that a valid agreement to arbitrate
exists and Plaintiff’s claims against Jerry Schiavo fall within
the scope of that agreement.
As a result, this Court is
required to compel arbitration.
Plaintiff’s claims, including fraud, conversion, and unjust
enrichment, asserted against Sharon Schiavo inextricably overlap
with the claims asserted against the Estate.
Plaintiff’s claims against Sharon Schiavo are so intertwined
with Plaintiff’s claims against the Estate, the Court will stay
Plaintiff’s claims against Sharon Schiavo, who was not a
signatory to the Agreement, pending the outcome of arbitration.
For the foregoing reasons, Defendants’ motion to dismiss
the complaint pursuant to the parties’ contractual arbitration
requirement and compel arbitration will be granted as to the
Defendants’ motion to dismiss Plaintiff’s claims
against Sharon Schiavo is denied without prejudice.
remaining claims against Sharon Schiavo will be stayed, pending
the outcome of arbitration.
An Order consistent with this
Opinion will be entered.
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
Dated: February 11, 2016
At Camden, New Jersey
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