SAECHOW v. PHILADELPHIA ACADEMIC HEALTH SYSTEM, LLC et al

Filing 37

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JOEL H. SLOMSKY ON 3/31/21. 3/31/21 ENTERED AND COPIES E-MAILED.(kw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
PAMELA SAECHOW,
Plaintiff,

CIVIL ACTION
NO. 19-2075

v.
PHILADELPHIA ACADEMIC HEALTH
SYSTEM, LLC, et al.,
Defendants.
OPINION
Slomsky, J.
I.

March 31, 2021

INTRODUCTION
Before the Court is the Second Motion to Compel Arbitration and Stay Proceedings filed

by Defendants American Academic Health System, LLC, Paladin Healthcare Capital, LLC, and
Joel Freedman (“Defendants”). (Doc. No. 23.)1 Defendants move to stay this case pending
arbitration, arguing Plaintiff is subject to a binding and valid arbitration provision. (See id. at 1.)
Plaintiff opposes the Motion, asserting that Defendants cannot compel arbitration of her claims

1

On July 16, 2019, another defendant, Philadelphia Academic Health System, LLC (“PAHS”),
and the three Defendants noted above filed a Motion to Compel Arbitration and Stay
Proceedings (Doc. No. 8) and also a Notice of Bankruptcy Stay as to PAHS (Doc. No. 10). On
September 11, 2019, the three Defendants filed a Motion to Stay Proceedings (Doc. No. 13)
pending resolution of the bankruptcy litigation, and the Court entered an Order scheduling a
hearing on the Motion to Stay for October 4, 2019 (Doc. No. 15). Prior to the hearing, the
parties jointly filed a Stipulation to Stay Proceedings for Sixty (60) Days (Doc. No. 17) because
Plaintiff anticipated receiving her Notice of Right to Sue Letter from the Equal Employment
Opportunity Commission (“EEOC”) within the sixty days, at which point she would seek leave
to amend her Complaint (Doc. No. 1). Following the hearing, the Court granted the sixty-day
stay and also entered an Order granting Plaintiff leave to file an amended complaint. (Doc.
Nos. 19-21.) After receiving her Letter Notice from the EEOC, Plaintiff filed the Amended
Complaint (Doc. No. 22) on February 28, 2020, and on March 13, 2020, the three Defendants
filed the Second Motion to Compel Arbitration and Stay Proceedings (Doc. No. 23), which is
presently before the Court for disposition.
1

because they are non-signatories to the agreement to arbitrate. (See Doc. No. 24-2 at 14.)
Alternatively, she argues the arbitration provision at issue is unconscionable and therefore
unenforceable and that her claims in Counts VII and X of the Amended Complaint, discussed infra,
are outside the scope of its coverage. (See id. at 2, 13.) Defendants’ Motion is now ripe for
disposition.
For reasons that follow, the Court will grant Defendants’ Second Motion to Compel
Arbitration and Stay Proceedings.
II.

BACKGROUND2
This suit arises out of Plaintiff’s employment with, and termination from her position as,

Chief Information Officer (“CIO”) at Defendants Philadelphia Academic Health System, LLC
(“PAHS”),3 American Academic Health System, LLC (“AAHS”), and Paladin Healthcare Capital,
LLC (“Paladin”) (collectively “the Company”).

(See Doc. No. 22 ¶ 1.)

Joel Freedman

(“Defendant Freedman” or “Freedman”) is “the Owner, Chairman and Chief Executive Officer of
PAHS and AAHS and a former owner, Chairman and Chief Executive Officer of Paladin.” (Id.)4
Defendants “own and/or manage multiple hospitals in Philadelphia.” (Id. ¶ 19.)
Plaintiff is a “well-respected, highly skilled and accomplished Information Technology
executive with extensive experience in her field.” (Id. ¶ 25.) Prior to her employment with the

2

For purposes of this Opinion, the Court accepts as true all factual allegations in the Amended
Complaint (Doc. No. 22) and documents relied upon therein. See infra Section III.

3

Defendant PAHS filed a petition for bankruptcy in the United States Bankruptcy Court for the
District of Delaware, and on July 16, 2019, PAHS filed a Notice of Bankruptcy Stay in this
case. (See Doc. No. 10.) Accordingly, all claims against PAHS are stayed until the conclusion
of the bankruptcy proceedings. (See Doc. Nos. 23-2 at 6 n.1; 24-2 at 2 n.1.)

4

In Plaintiff’s Response to the Motion, she avers that PAHS is “a subsidiary of AAHS, which
is in turn a subsidiary of Paladin and all three of which are owned by Mr. Freedman.” (Doc.
No. 24-2 at 10.)
2

Company, she was an “Associate [CIO] at a nationally renowned healthcare organization that is
consistently among the top-grossing hospitals in the United States and highly regarded in the area
of technological management systems.” (Id. ¶ 26.)
A.

Plaintiff’s Employment and Termination

In November or December 2016, Freedman approached Plaintiff for the first time regarding
a potential CIO position with the Company. (See Doc. No. 22 ¶ 29.) Thereafter, Plaintiff had a
phone interview with Freedman during which she “provided salary expectations.” (Id. ¶ 30.) On
August 26, 2017, Freedman and his wife5 (“the Freedmans”) began to “aggressively pursue”
Plaintiff for the CIO position. (Id. ¶ 31; see also id. ¶¶ 32-36.) The Freedmans’ recruitment efforts
persisted over seven months. (See ids.)
On June 26, 2018, Freedman verbally offered Plaintiff the CIO position to which she
responded that “she was expecting her total annual compensation [as CIO of the Company] to be
commensurate with her expectations as she was leaving a world-class organization.” (Id. ¶ 38; see
also id. ¶ 37.) Given Plaintiff’s “excellent work ethic” and reputation in the industry for achieving
results and “having a talent pool that followed her from one organization to the next,” the Company
offered her a “significant bonus” to ensure that she “would earn a total compensation package
commensurate with her salary expectations.” (Id. ¶¶ 39-40.)
After taking “some time to consider the offer,” Plaintiff asked Freedman to meet with the
Company’s executive team in July 2018 to better “understand their financial performance and
business model.”

5

(Id. ¶¶ 41-42.)

“[G]iven that the Company was a start-up healthcare

The Amended Complaint states that on August 6, 2016, Plaintiff “was introduced to the owners
of PAHS and AAHS, Joel and Stella Freedman, at the wedding of a mutual friend” and over
the next few months, Plaintiff occasionally saw the Freedmans at social events. (Doc. No. 22
¶¶ 27-28.)
3

organization,” Plaintiff wanted to meet with the executive team in order to ensure that the
Company would be a good fit for her before she decided to leave her current position with a
“world-class organization.” (Id. ¶¶ 42, 44.)
After meeting with the executive team, Plaintiff met with Freedman “one-on-one to discuss
his goals . . . and budget expectations” for the Information Technology (“IT”) department. (Id. ¶
43.) They also discussed Plaintiff’s role in meeting these goals as the new CIO of the Company.
(See id. ¶¶ 44-49.) Specifically, Plaintiff would be tasked with building and implementing a new
IT “foundation/department” to replace the Company’s current systems (“the ‘IT go-live project’”).
(Id. ¶ 47; see also id. ¶ 56.)
While discussing details about the IT go-live project, Plaintiff “questioned . . . Freedman
about his IT budget, which he initially indicated he thought might be approximately $6,000,000,
but that he would defer to [Plaintiff’s] expertise in this regard.” (Id. ¶ 46.) Based on her industry
knowledge, Plaintiff provided Freedman with an estimate of what “the Company should expect to
spend” in “changing out all of its systems to build a new foundation/department.” (Id. ¶ 47.)
Freedman responded that the Company’s “operating revenue was an estimated $800,000,000, but
[because] IT was so critical to [its] needs[,] he would find the money in the budget and make the
right investments into IT.” (Id. ¶ 48.)
During the week of July 16, 2018, Plaintiff verbally accepted Freedman’s offer for the CIO
position with the Company. (See id. ¶ 52.) Four days later, Plaintiff “was offered the [CIO]
position . . . pursuant to a written employment agreement – ‘the Offer Letter’.” (Id. ¶ 53; see also
Doc. No. 24-2 at 4.) Attached to the Offer Letter were copies of the: (1) “Open Door Policy and
Fair Treatment Process” (“the FTP Policy”)6; (2) “Open Door Policy and Fair Treatment Process

6

(See Doc. No. 23-2, Ex. 1 ¶ 7 & Ex. B.)
4

Acknowledgement Form” (“the Acknowledgment Form”)7; and (3) “Restrictive Covenants
Agreement” (“the RCA”) (see Doc. No. 24-3).8
The Offer Letter, dated July 20, 2018, contains the signatures of Defendant Freedman and
Plaintiff, as well as a list of the three enclosures described supra. (See Doc. No 23-2, Ex. 1 ¶ 6 &
Ex. A.)9 The Offer Letter provides, in relevant part:
On behalf of [PAHS], an affiliate of [AAHS], it is my pleasure to offer you the
position of [CIO]. . . . By accepting this offer, as a condition of employment, you
agree to be bound by the [FTP Policy], including its mandatory arbitration
provision, a copy of which is enclosed with this letter. This offer is contingent
upon: (1) your successful completion of identity verification, employment
authorization and pre-employment background check and drug screening; (2) your
7

(See id., Ex. 1 ¶ 8 & Ex. C.)

8

The Offer Letter, FTP Policy, and Acknowledgment Form were attached as exhibits to
Defendants’ Motion. (See Doc. No. 23-2, Ex. 1 ¶¶ 6-8 & Exs. A, B, & C.) The RCA was
attached as an exhibit to Plaintiff’s Response to the Motion. (See Doc. No. 24-3.) In reviewing
a motion to compel arbitration, the Court may consider the complaint and its supporting
documents, including “the substance of the contracts that ostensibly compel arbitration.”
CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 168 n.2 (3d Cir. 2014); Guidotti v. Legal
Helpers Debt Resolution, L.L.C., 716 F.3d 764, 776 (3d Cir. 2013); see also Johnson v. Ergon
West Virginia, Inc., No. 14-453, 2015 WL 5286234, at *2 (W.D. Pa. Sept. 10, 2015)
(“Although not attached to the Second Amended Complaint . . . the Contract is a document
relied upon in said Complaint—submitted by Defendant as an exhibit to the Motion to [Compel
Arbitration]—and thus it will be considered by the Court.”); Shank v. Fiserv, Inc., No. 155319, 2016 WL 161902, at *2 n.1 (E.D. Pa. Jan. 14, 2016) (stating that for Guidotti purposes,
the “complaint” includes the motion to compel arbitration and the documents attached thereto).
As discussed below, because the Amended Complaint relies upon the contract at issue here,
i.e., the Offer Letter and its enclosures, see infra Section IV, and because these documents are
attached as exhibits to the parties’ briefs with respect to the instant Motion, the Court may
properly consider the substance of these documents.

9

In her Response to the Motion, Plaintiff states that: “[i]n order to begin working for PAHS,
[she] was required to execute . . . [the RCA] and the [Acknowledgment Form] acknowledging
receipt and agreement to PAHS’ [FTP Policy]. . . . The FTP [Policy] was not necessary or
relied upon in drafting . . . [the Amended Complaint]. Although not appended to Defendants’
Motion, the [RCA] was also attached to and referenced in [Plaintiff’s] Offer Letter.” (Doc.
No. 24-2 at 4 & n.4.) Thus, it is undisputed that Plaintiff received, along with her Offer Letter,
a copy of the FTP Policy, Acknowledgment Form, and RCA. The parties do not dispute the
authenticity of these documents.
5

agreement to be bound by PAHS’s practices and policies; and (3) execution of the
[RCA] and [Acknowledgment Form] that are enclosed with this letter. . . . This
[O]ffer [L]etter, along with its enclosures, contains the entire agreement between
[Plaintiff] and PAHS.
(See id.)
The Offer Letter also includes a start date of August 13, 2018, as well as the following
terms and conditions of Plaintiff’s employment: she would be reporting to Freedman and PAHS’s
Chief Administrative Officer; a description of her compensation package, which would include a
“substantial” bi-weekly annual salary “along with benefits, participation in the Company’s 401(k)
Plan, paid time off, . . . reimbursement of housing and tuition costs,” and bonuses she would
become eligible to receive at PAHS’s discretion, including a “significant monetary implementation
bonus . . . upon the new IT system going live” and thereafter, “an annual bonus of 30% of her base
salary.” (Doc. No. 22 ¶¶ 54-56; see also Doc. No. 23-2, Ex. 1 ¶ 6 & Ex. A.)
The FTP Policy enclosed with the Offer Letter provides, in relevant part:
[AAHS], its consolidated subsidiaries, parents, affiliates, hospitals, healthcare
operations and other entities owned or operated by [AAHS]’s consolidated
subsidiaries (collectively, “AAHS” or the “Company”) utilize an Open-Door Policy
designed to encourage employees to openly express . . . any issue related to their
employment. . . . [I]n addition to the Open-Door Policy, AAHS has established the
Fair Treatment Process . . ., a comprehensive mechanism for resolving
employment-related disputes between the Company and its employees. . . . that
ultimately provides for final and binding arbitration of such disputes . . . .
(Doc. No. 23-2, Ex. 1 ¶ 7 & Ex. B at 1, 3) (emphasis added). The FTP Policy contains a mandatory
arbitration provision (“the FTP Arbitration Provision”), which states, in relevant part:
The FTP applies to all employees, regardless of length of service or status, and
covers all disputes relating to or arising out of an employee’s employment with
the Company or the termination of employment. The only disputes or claims not
covered by the FTP are those listed in the “Exclusions and Restrictions” section
below. Examples of the type of disputes or claims covered by the FTP include,
but are not limited to, claims for wrongful termination of employment, breach of
contract, employment discrimination, harassment or retaliation under the
Americans With Disabilities Act, the Age Discrimination in Employment Act, Title

6

VII of the Civil Rights Act of 1964 and its amendments or any state or local
discrimination laws, tort claims or any other legal claims and causes of action
recognized by local, state or federal law or regulations. An employee’s decision
to accept employment or to continue employment constitutes his or her agreement
to be bound by the FTP. Likewise, the Company agrees to be bound by the FTP.
This mutual agreement to arbitrate claims means that both the employee and the
Company are bound to use the FTP process as the only means of resolving
employment-related disputes, and thereby agree to forego any right they each may
have had to a jury trial on issues covered by the FTP.
...
The arbitration process is limited to disputes, claims or controversies that a court of
law would be authorized or have jurisdiction over to grant relief and that in any
way arise out of, relate to or are associated with an employee’s employment with
the Company or the termination of employment.
(Id.) (emphasis added).10
Also enclosed with the Offer Letter was the Acknowledgment Form, which provides, in
relevant part:
Welcome to [PAHS] . . ., an affiliate of [AAHS]. . . . You acknowledge that you
have . . . received a copy of the [FTP Policy] . . . from PAHS. [The FTP Policy] is
a mutual dispute resolution and arbitration program, which sets forth PAHS’s
procedure for resolving workplace disputes ending in final and binding individual
arbitration. You understand that it is your responsibility to read and familiarize
yourself with the information contained in the FTP [Policy]. You understand that,
by accepting or continuing your employment with PAHS, you are agreeing to be
bound by the FTP [Policy].
(Id., Ex. 1 ¶ 8 & Ex. C) (emphasis added).
As previously stated, see supra note 9, Plaintiff avers in her Response to the Motion to
Compel that, prior to her employment with the Company, she was “required to execute . . . the
[Acknowledgment Form] acknowledging receipt and agreement to . . . [the FTP Policy].” (Doc.
No. 24-2 at 4.) Plaintiff was also “required to sign a non-compete agreement,” i.e., the RCA.

10

The FTP Arbitration Provision contained in the FTP Policy constitutes the arbitration
agreement at issue.
7

(Doc. No. 22 ¶ 110.) The RCA “contains restrictions against [Plaintiff] disclosing PAHS’[s]
confidential information, soliciting or interfering with PAHS’[s] relationship with its employees
or others engaged by PAHS, and competing with PAHS during her employment and for one year
thereafter.” (Doc. No. 24-2 at 4; see also Doc. No. 24-3 ¶¶ 2-4.)11 It also “reserves to the Company
the right to seek injunctive relief with respect to the [RCA] ‘from any court . . .’” (Doc. No. 22 ¶
112; see also Doc No. 24-2 at 4.) The relevant language from the RCA provides that:
[Plaintiff] agrees and acknowledges that the injury the [Company] would suffer
because of breach of the Non-Disclosure, Non-Solicitation or Non-Competition in
[sic] provisions would be irreparable and that an award of monetary damages for
breach would be an inadequate remedy. Consequently, the [Company] shall have
the right . . . to obtain injunctive relief from any court or arbitrable tribunal of
competent jurisdiction to restrain any breach or threatened breach or to
specifically enforce any provision of the [RCA] . . .
(Doc. No. 24-3 ¶ 5) (emphasis added).
On July 20, 2018, Plaintiff countersigned the Offer Letter (see Doc. No. 23-2, Ex. 1 ¶ 6)
and executed the Acknowledgment Form in which she “acknowledged receiving a copy of the
[FTP Policy] and agreed to be bound by it.” (Id., Ex. 1 ¶ 8; see also Doc. No. 24-2 at 4.) Thereafter,
“[i]n reliance upon the promises contained in the Offer Letter, and the other promises made to her
by . . . Freedman, [Plaintiff] resigned from her stable position with a world-class organization, sold
her house, relocated and began working for the Company.” (Doc. No. 22 ¶ 58.)
Shortly after Plaintiff was hired, her relationship with Defendants began to breakdown.
During the month of August 2018, Plaintiff began engaging staffing companies and consulting
firms “to assist with and ensure the success of” the IT go-live project. (Id. ¶ 59.) To this end, she

11

Plaintiff claims the RCA contains non-disclosure, non-solicitation, and non-competition
provisions with respect to PAHS only. (See Doc. No. 24-2 at 4.) However, the RCA explicitly
provides that it is entered “by and between [AAHS], including its parents, subsidiaries,
affiliates, divisions, successors, and related entities . . . and [Plaintiff].” (Doc. No. 24-3 at 2.)
8

presented Freedman and the Chief Administrative Officer with a formal staffing plan and IT
budget detailing the expected costs of these resources, which they approved on September 5, 2018.
(Id. ¶¶ 61-62.) One of the approved consulting firms (“the Firm”) was owned by a mutual friend
of the Freedmans and Plaintiff (“Mutual Friend”). (See id. ¶¶ 63-64.) After a personal falling out
between Mrs. Freedman and the Mutual Friend, Defendant Freedman informed Plaintiff that he
decided to terminate the contract with the Firm. (See id. ¶¶ 64-65.)
Over the next few months, “the Company’s financial picture grew more problematic” and
the Firm began pressuring the Company “to make payment of money due pursuant to [its]
contract.” (Id. ¶ 70.) At this point, Freedman appeared to be “desperate[ly] [trying] to find a way
out of the contract with the [F]irm in order to save money” and “became increasingly hostile
toward [Plaintiff].” (Id.) Between late October 2018 and early January 2019, Freedman continued
to pressure Plaintiff about the contract dispute with the Firm and on one occasion threatened that
she “would ‘need to interject and agree or things will get really ugly and [Plaintiff] will get pulled
into it personally.” (Id. ¶ 88; see also id. ¶¶ 86-89.)
On October 15, 2018, Plaintiff learned that the Company hired Chief Clinical
Transformation Officer Dr. Manny Sacapano to oversee the IT Department. (See id. ¶ 71.)
“Almost immediately upon taking oversight responsibility for the IT [D]epartment,” Sacapano
started being openly hostile and demeaning toward Plaintiff, who claims that he “inappropriately
propositioned” her in late October 2018. (Id. ¶¶ 71-72.) During this time, Plaintiff also “believed
that she was being pressured to engage in illegal and unethical activities.” (Id. ¶ 74.)
In October 2018, and on several ensuing occasions, Plaintiff lodged a complaint with
Assistant General Counsel and Chief Human Resources Officer John DiNome and others “that she
was being discriminated against and harassed, and about . . . unethical and illegal activity she [had]

9

observed regarding patient safety and other issues.” (Id. ¶ 79; see also id. ¶¶ 90, 97.) And in
November 2018, Freedman began “complain[ing] extensively about IT costing too much.” (Id. ¶
82.) On November 19, 2018, Plaintiff told Freedman in a meeting “that his actions and treatment
of her regarding IT decisions, among other issues, had made it increasingly difficult to perform
the job she had been hired to do.” (Id. ¶¶ 82-83.) Freedman then “threatened to sue [Plaintiff] if
she were to leave to work elsewhere with only thirty days[’] . . . notice or before completing the
IT go-live project.” (Id. ¶ 83.) Plaintiff alleges that, “[a]t the conclusion of the meeting, Mr.
Freedman asked [her] for a hug and kissed her on the forehead.” (Id.)
After lodging a second complaint with DiNome on January 8, 2019, Plaintiff was demoted
and informed that she would now be reporting to Dr. [Troy] Sybert,” who she claims had
previously subjected Plaintiff and other female employees to sex discrimination. (Id. ¶ 92; see
also id. ¶¶ 80, 90.) On January 10, 2019, the Firm informed the Company “that all communications
. . . should be directed to the [F]irm’s counsel,” and Freedman subsequently “accused [Plaintiff]
of having engaged in wrongdoing.” (Id. ¶¶ 94-95.) “Around this same time, [he] began to make
false statements about [Plaintiff] to other employees,” and on January 13, 2019, Plaintiff
complained in writing to DiNome, Freedman, and others about the “toxic environment by the
Company since her hire, and [how she had] been asked to engage in unethical and illegal conduct
on countless occasions.” (Id. ¶¶ 96-97.)
The following day, Plaintiff met with DiNome to discuss her complaint. (See id. ¶ 99.) At
the conclusion of their meeting, he informed Plaintiff “that she was being placed on paid
suspension while the Company investigated her concerns.” (Id. ¶ 100.) While Plaintiff was
suspended, however, the Company told one of its third-party vendors that Plaintiff had been
terminated for cause. (See id. ¶¶ 102-03.)

10

“On January 25, 2019, [Plaintiff] received a termination letter indicating that she was
terminated for cause effective immediately.” (Id. ¶ 107.) The reasons offered for her termination
included, inter alia, “mismanagement, failure to take direction from [Freedman], disrespecting her
peers, [and] disparaging other executives,” which Plaintiff denies as “complete fabrications and
not supported by the evidence.” (Id. ¶¶ 107-08.)
B.

Plaintiff’s Claims Against Defendants

On May 13, 2019, Plaintiff filed her initial Complaint against Defendants PAHS, AAHS,
Paladin, and Freedman, alleging violations of the Pennsylvania Wage Payment and Collection
Law, 43 Pa.C.S. § 260.1, et seq. (“PWPCL”), the Pennsylvania Whistleblower Law, 43 Pa.C.S. §
1421, et seq. (“PWL”), and Pennsylvania common law. (See Doc. No. 1 ¶ 1.)12 On February 28,
2020, Plaintiff filed an Amended Complaint in which she added alleged violations of federal law
under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (“Title
VII”), and the Civil Rights Act of 1866, 42 U.S.C. § 1981 (“Section 1981”). (See Doc. No. 22 ¶
1.)
In the Amended Complaint, Plaintiff alleges in 13 Counts: (1) breach of contract, (2) breach
of implied contract, (3) a PWPCL violation, (4) fraudulent inducement, (5) promissory
estoppel/detrimental reliance, (6) unjust enrichment, (7) tortious interference with contractual
relations, (8) wrongful termination, (9) a PWL violation, (10) defamation, (11) request for a
declaratory judgment invalidating non-compete provisions contained in Plaintiff’s employment

12

Plaintiff originally filed this case in federal court pursuant to 28 U.S.C. § 1332 diversity of
citizenship jurisdiction. (See Doc. No. 1 ¶ 2.) In the Amended Complaint, Plaintiff invokes
the jurisdiction of this Court pursuant to 28 U.S.C. § 1331, which covers federal question
jurisdiction, and 28 U.S.C. § 1343(4), which covers civil rights jurisdiction. (See Doc. No. 22
¶¶ 2-3.)
11

contract, (12) a Title VII violation, and (13) a Section 1981 violation. (See id. at 25-37.)13
Plaintiff avers that Defendants AAHS, PAHS, and Paladin, i.e., the Company, are
“interchangeable business entities” with “common ownership . . . [and] management.” (Id. ¶ 20.)
Plaintiff also claims that, at all relevant times, the Company “operated as one single business
entity” by, for example, sharing resources, including employees. (Id. ¶¶ 21, 23.) Plaintiff further
alleges that, “despite her Employment Agreement being with PAHS, [she] was paid by AAHS and
all other agreements were between [her] and AAHS,” and she “performed significant work for
and/or on behalf of” the Company. (Id. ¶ 24.)14
C.

Defendants’ Second Motion to Compel Arbitration and Plaintiff’s Response

On March 13, 2020, Defendants filed the instant Second Motion to Compel Arbitration
(Doc. No. 23), arguing that Plaintiff’s claims are subject to a valid and enforceable arbitration
provision under the Federal Arbitration Act (“FAA”) and that this case must be stayed pending
arbitration. (See Doc. No. 23-2 at 1, 19-20.) They assert that the arbitrability of Plaintiff’s
employment-related claims is apparent from the Amended Complaint such that the Rule 12(b)(6)
standard applies to the instant Motion, and that the FTP Policy is valid and enforceable under
Pennsylvania law. (See id. at 9-16.) Finally, they submit that all of Plaintiff’s claims fall within
the scope of the FTP Arbitration Provision. (See id. at 16-19; see also Doc. No. 25 at 8-9.)

13

Plaintiff asserts claims in the Amended Complaint against the Company in Counts I through
XIII (see Doc. No. 22 ¶¶ 132-234), and against Defendant Freedman in Counts III, IV, V, VII,
and X (see id. ¶¶ 143-68, 175-83, 198-204).

14

In the Amended Complaint, Plaintiff refers to Defendants PAHS, AAHS, and Paladin
collectively as “the Company.” (See Doc. No. 22 ¶ 1.) And in Plaintiff’s Response to the
Motion, she “refers to all four Defendants”—PAHS, AAHS, Paladin, and Freedman—
“collectively as the ‘Company’ or ‘Defendants’. . . .[,] [as] [she] brings a number of claims
against the corporate entities collectively due to, [inter alia], their using their corporate
identities interchangeably.” (Doc. No. 24 at 4 n.3.)
12

On March 27, 2020, Plaintiff filed a Response in Opposition to Defendants’ Motion. (Doc.
No. 24.) Initially, she argues the defense of arbitrability is not apparent from the face of the
Amended Complaint. (See Doc. No. 24-2 at 6-8, 14-15.) Alternatively, Plaintiff asserts she has
presented reliable evidence to place the issue of arbitrability in dispute such that the Court should
order discovery and apply the summary judgment standard to the Motion. (See id. at 14-15.) Next,
she argues Defendants cannot enforce the provision to compel arbitration of her claims because
they are non-signatories to the agreement. (See id. at 14.) Finally, Plaintiff contends her claims
for defamation and tortious interference with contractual relations are not covered by the language
of the FTP Arbitration Provision because they are based on Defendants’ post-termination conduct.
(See id. at 13.)
On April 3, 2020, Defendants filed a Reply to Plaintiff’s Response in Opposition. (Doc.
No. 25.)
III.

ANALYSIS
A.

Applicable Standard of Review

The Court will review the Motion under the Rule 12(b)(6) standard.
Until recently, the proper standard for evaluating a motion to compel arbitration under the
Federal Arbitration Act (“FAA”) was unclear. Some courts applied a Rule 12(b)(6) motion to
dismiss standard, while others applied a Rule 56 motion for summary judgment standard. This
dichotomy was clarified by the Third Circuit Court of Appeals in Guidotti v. Legal Helpers Debt
Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013).
In Guidotti, the Third Circuit explained that the inconsistent application of the two
standards stemmed from “the competing purposes of the FAA, and by the values underlying
contract interpretation.” Id. at 773. The Court found that “the FAA places considerable emphasis
on ‘efficient and speedy dispute resolution,’” favoring the application of a Rule 12(b)(6) motion
13

to dismiss standard and no discovery process. Id. (quoting Dean Witter Reynolds, Inc. v. Byrd,
470 U.S. 213, 221 (1985)). However, the United States Supreme Court has “reject[ed] the
suggestion that the overriding goal of the Arbitration Act was to promote the expeditious resolution
of claims.” Id. (alteration in original) (quotation marks omitted) (quoting Dean Witter, 470 U.S.
at 219). Thus, as Guidotti noted, this indicates that discovery should be permitted and a motion
for summary judgment standard may apply. Id. at 774.
The Guidotti court also found, however, that “[b]ecause ‘arbitration is a matter of contract
between the parties,’ a judicial mandate to arbitrate must be predicated upon the parties’ consent.”
Id. at 771 (citation and quotation marks omitted). In an effort to ensure that an order to arbitrate
is based on the parties’ consent, and to enforce the provisions of the FAA, the court noted that the
standard of review for motions to compel arbitration should be tied to the strength of the complaint
and its supporting documents. The court therefore held that:
[W]hen it is apparent, based on “the face of a complaint, and documents relied upon
in the complaint,” that certain of a party’s claims “are subject to an enforceable
arbitration clause, a motion to compel arbitration should be considered under a Rule
12(b)(6) standard without discovery’s delay.” . . . But if the complaint and its
supporting documents are unclear regarding the agreement to arbitrate, or if the
plaintiff has responded to a motion to compel arbitration with additional facts
sufficient to place the agreement to arbitrate in issue, then “the parties should be
entitled to discovery on the question of arbitrability before a court entertains further
briefing on [the] question.” . . . After limited discovery, the court may entertain a
renewed motion to compel arbitration, this time judging the motion under a
summary judgment standard. In the event that summary judgment is not warranted
because “the party opposing arbitration can demonstrate, by means of citations to
the record,” that there is “a genuine dispute as to the enforceability of the arbitration
clause,” the “court may then proceed summarily to a trial regarding ‘the making of
the arbitration agreement or the failure, neglect, or refusal to perform the same,’ as
Section 4 of the FAA envisions.”
Id. at 776 (quoting Somerset Consulting, LLC v. United Cap. Lenders, LLC, 832 F. Supp. 2d 474,
482 (E.D. Pa. 2011)); see also Sanford v. Bracewell & Guiliani, LLP, 618 F. App’x 114, 117 (3d
Cir. 2015).

14

Stated otherwise, a district court will review a motion to compel arbitration under the Rule
12(b)(6) standard “if arbitrability is apparent on the face of the complaint and incorporated
documents, and the opposing party fails to set forth reliable, additional evidence showing that it
did not intend to be bound by the arbitration clause.” Richards v. Am. Acad. Health Sys., LLC.,
No. 20-00059, 2020 WL 2615688, at *3 (E.D. Pa. May 22, 2020). “If, however, arbitrability is
not apparent on the face of the complaint and its supporting documents, or the opposing party has
come forth with reliable evidence that it did not intend to be bound by the clause, the Court will
order discovery on the issue of arbitrability and then consider the renewed motion” under the Rule
56 standard. Id.
1.

Arbitrability is Apparent on the Face of the Amended Complaint
and Supporting Documents

The arbitrability of Plaintiff’s claims is apparent on the face of the Amended Complaint
and supporting documents. In determining whether the arbitrability of Plaintiff’s claims is
apparent, district courts consider “the face of a complaint, and documents relied upon [there]in.”
Guidotti, 716 F.3d at 776 (citation and quotation marks omitted). Accordingly, an arbitration
agreement need not be attached to the complaint in order to be “apparent.” See Richards, 2020
WL 2615688, at *3 n.5 (“The contract containing the arbitration clause does not need to be attached
to the operative complaint.”). “Rather, it simply needs to be relied upon or incorporated in the
complaint.” Id.15

15

See also Lawson v. City of Philadelphia, No. 18-1912, 2019 WL 934976, at *2 (E.D. Pa. Feb.
25, 2019) (alterations in original) (quoting CardioNet, 751 F.3d at 168 n.2) (“An arbitration
clause may be deemed ‘apparent’ even when a ‘contract[], though not appended to the
Complaint, [is] integral to, and referenced in, the Complaint.’ . . . Accordingly, when ‘the
arbitration clause at issue appears in a contract relied upon in the Complaint, [the court]
resolve[s] the motion to compel arbitration under a motion to dismiss standard[.]’”); Mayer v.
Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (“[Under] Rule 12(b)(6) . . . a court must consider
15

In the instant case, Defendants submit that arbitrability of Plaintiff’s claims is apparent on
the face of the complaint and supporting documents because the Amended Complaint “references
and relies on the Offer Letter, . . . which explicitly incorporated the FTP [Policy] and its mandatory
arbitration provision.” (Doc. No. 23-2 at 10.) Thus, Defendants argue that the Court should apply
the Rule 12(b)(6) standard in resolving the Motion. (See id. at 9-10.) Conversely, Plaintiff
contends that the Amended Complaint and its supporting documents do not “facially establish
arbitrability” and the Court must therefore order discovery on the issue and review the Motion
under the Rule 56 standard. (Id. at 14-15.)
Here, the FTP Arbitration Provision was both relied upon and incorporated in the Amended
Complaint. The parties do not dispute that the Offer Letter was explicitly referenced in the
Amended Complaint (see Doc. Nos. 23-2 at 10; 24-2 at 4) or that the FTP Policy containing the
arbitration provision was “attached to and referenced in [Plaintiff’s] Offer Letter.” (Doc. No. 242 at 4 n.4; see also Doc. No. 23-2 at 10, Ex. 1 ¶ 6 & Ex. A at 2.)
Further, the Amended Complaint alleges Defendants committed various torts and statutory
violations in connection with Plaintiff’s employment with PAHS and subsequent termination. (See
Doc. No. 22 ¶ 1; see also Doc. No. 24-2 at 5.) Plaintiff also claims the Company offered her the
CIO position pursuant to a written “Offer Letter” setting forth the terms and conditions of
Plaintiff’s employment with the Company. (See Doc. No. 22 ¶¶ 53-58.)16 And Plaintiff even
relies upon the Offer Letter in suing the Company for breach of contract (Count I). (See id. ¶¶

only the complaint, exhibits attached to the complaint . . . as well as undisputedly authentic
documents if the complainant’s claims are based upon those documents.”).
16

As discussed in Section II.A, supra, attached to the Offer Letter were the following enclosures:
(1) the FTP Policy, which contains the FTP Arbitration Provision; (2) the Acknowledgment
Form; and (3) the RCA. These enclosures were submitted as exhibits to the parties’ briefs.
See supra note 4.
16

132-37) (seeking damages for breach of promises in the Offer Letter to pay Plaintiff severance pay
and monetary bonus for the IT go-live project). Plaintiff includes in the Amended Complaint some
of the terms and conditions of the Offer Letter, such as her salary and benefits, while excluding
others. (See id.) One of the excluded conditions is the FTP’s mandatory arbitration provision.
(See id.) The Offer Letter, however, expressly references this provision, providing that: “[b]y
accepting this offer, as a condition of employment, [Plaintiff] agree[s] to be bound by the [FTP],
including its mandatory arbitration provision, a copy of which is enclosed with this letter.” (Doc.
No. 23-2 at 7; see also id., Ex. 1 ¶ 6 & Ex. A at 2.) Moreover, the Offer Letter explicitly states
that the letter, “along with its enclosures, contains the entire agreement between [Plaintiff] and
PAHS.” (Doc. No. 23-2, Ex. 1 ¶ 6 & Ex. A at 2.) Thus, the Amended Complaint incorporates the
Offer Letter and the enclosed FTP Policy, including the mandatory arbitration provision contained
therein.
Because the FTP Arbitration Provision “appears in a contract relied upon in the
[c]omplaint,” arbitrability is apparent on the face of the Amended Complaint and supporting
documents. CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 168 n.2 (3d Cir. 2014) (resolving
motion to compel under 12(b)(6) standard “[b]ecause the arbitration clause at issue appear[ed] in
a contract relied upon in the Complaint”).
2.

Plaintiff Has Not Presented Reliable Evidence Sufficient
to Place the Agreement to Arbitrate in Issue

Plaintiff does not set forth reliable, additional evidence sufficient to place the arbitration
agreement in issue. Under Guidotti, if an opposing party responds to a motion to compel
arbitration with “additional facts sufficient to place the agreement to arbitrate in issue,” 716 F.3d
at 776, “the Court will order discovery on the issue of arbitrability and then consider the renewed
motion pursuant to the Rule 56 summary judgment standard.” Richards, 2020 WL 2615688, at *3

17

(citations omitted). “Discovery is not warranted,” however, “without reliable evidence that ‘is
more than a naked assertion . . . that [the party] did not intend to be bound by the arbitration
clause.’” Id. at *3 n.5 (quotation marks omitted) (quoting Guidotti, 716 F.3d at 774).
Here, Plaintiff contends that discovery on the issue of arbitrability is warranted and the
Rule 56 standard should be applied because she has presented evidence that the FTP Arbitration
Provision is unconscionable and therefore unenforceable. (See Doc. No. 24-2 at 8-13.) In
response, Defendants argue that the FTP is neither procedurally nor substantively unconscionable
but instead is valid and enforceable as to all of Plaintiff’s claims. (See Doc. No. 25 at 2-7.) They
submit that because Plaintiff has not responded to the Motion with reliable evidence sufficient to
place the FTP Policy in dispute, she is not entitled to discovery on the issue and the Court should
apply the Rule 12(b)(6) standard. (See id.; see also Doc. No. 23-2 at 12-13.)
As discussed extensively in Section III.C.1, infra, the Court has concluded that the FTP
Arbitration Provision is not unconscionable and instead is a valid and enforceable arbitration
agreement under Pennsylvania law.

Accordingly, Plaintiff has failed to set forth reliable,

additional evidence sufficient to place the FTP Arbitration Provision in issue.
In sum, because arbitrability is apparent on the face of the Amended Complaint and the
Offer Letter relied upon therein, and because Plaintiff has not responded to the Motion with
additional facts sufficient to place the FTP Arbitration Policy in issue, the Court will review the
Motion under the Rule 12(b)(6) standard. Under this standard, the Court accepts as true all factual
allegations in the Amended Complaint and its supporting documents. See Guidotti, 716 F.3d at
776; CardioNet, 751 F.3d at 168 n.2 (in applying the Rule 12(b)(6) standard to a motion to compel
arbitration, the court “accept[s] as true the factual allegations set forth in the Complaint” and may
“consider the substance of the contracts that ostensibly compel arbitration.”).

18

B.

Defendants May Enforce the FTP Arbitration Provision as Non-Signatories
Under Reverse Equitable Estoppel

In opposing arbitration, Plaintiff contends that Defendants are not parties to the FTP Policy
and therefore cannot compel arbitration of her claims against them. (See Doc. No. 24-2 at 14.) In
the Amended Complaint, Plaintiff states that her “employment agreement” was with Defendant
PAHS only. (Doc. No. 22 ¶¶ 1, 22.)17 Thus, in her Response to the Motion, she argues that she
agreed to arbitrate her claims “with respect to [PAHS] only, and there was no [arbitration]
agreement between [Plaintiff] and the remaining Defendants.” (Doc. No. 24-2 at 2.) Accordingly,
she claims that Defendants, as non-signatories to the FTP Policy, cannot enforce the FTP
Arbitration Provision against her. (Id. at 14.)
In their Reply, Defendants submit that the FTP Arbitration Provision covers Defendants
AAHS, Paladin, and Freedman because, by its plain terms, the FTP Policy expressly applies to
“[AAHS], its consolidated subsidiaries, parents, affiliates, . . . and other entities owned or operated
by [AAHS].” (Doc. No. 25 at 9; see also Doc. No. 23-2, Ex. 1 ¶ 7 & Ex. B at 1.) They further
argue that because Plaintiff “brings a number of claims against the corporate entities collectively
due to, among other things, their using their corporate identities interchangeably,” AAHS, Paladin,
and Freedman may compel arbitration of Plaintiff’s claims despite being non-signatories to the
FTP Policy. (Doc. No. 24-2 at 4 n.3; see also Doc. No. 25 at 9-10.)
The FAA “expresse[s] a strong federal policy in favor of resolving disputes through
arbitration.”

Richards, 2020 WL 2615688, at *4 (quoting Century Indem. Co. v. Certain

Underwriters at Lloyd’s London, 584 F.3d 513, 522 (3d Cir. 2009)). Accordingly, “[a] court may

17

Elsewhere in the Amended Complaint and in her Response to the Motion, however, Plaintiff
states that she “was offered the position of [CIO] with the Company pursuant to a written
employment agreement – ‘the Offer Letter’.” (Doc. No. 22 ¶ 53; see also Doc. No. 24-2 at 4.)
19

compel arbitration even as to non-signatories of the arbitration agreement [or provision] under
applicable state law doctrines of ‘assumption, piercing the corporate veil, alter ego, incorporation
by reference, third party beneficiary theories, waiver and estoppel.’” Id. (quoting Noye v. Johnson
& Johnson Servs., Inc., 765 F. App’x 742, 745-48 (3d Cir. 2019)).
Here, it is undisputed that Pennsylvania law applies. (See Doc. Nos. 23-2 at 23; 24-2 at 9.)
In the Motion, Defendants seek to compel Plaintiff to be bound by the FTP Arbitration Provision
based on the theory of alternative equitable estoppel. “Under Pennsylvania law ‘alternative
equitable estoppel,’ or ‘reverse estoppel,’ allows ‘non-signatories to an arbitration agreement [to]
enforce such an agreement when there is an obvious and close nexus between the non-signatories
and the contract or the contracting parties.’” Richards, 2020 WL 2615688, at *4 (alteration in
original) (quoting Noye, 765 F. App’x at 746). In Noye v. Johnson & Johnson Services, Inc., 765
F. App’x 742 (3d Cir. 2019), the Third Circuit “specified that there need only be a ‘close nexus’
between either (i) the non-signatory and a signatory, or (ii) the non-signatory and the contract.”
Richards, 2020 WL 2615688, at *4 (emphasis in original) (quoting Noye, 765 F. App’x at 746 nn.
6-7); see also id. (stating the court in Noye “adopt[ed] the single factor test” to replace “the
conjunctive test . . . .”).
In Noye, the Third Circuit found an “obvious and close nexus” between non-signatory
Johnson & Johnson (“J&J”) and the contract, and between J&J and the signatories to the contract.
765 F. App’x at 747-48. Plaintiff Noye contracted with a temporary staffing agency for placement
as an operations supervisor at J&J. Id. at 743-44. Prior to Noye’s placement at J&J, he and the
agency executed several documents, including arbitration and employment agreements and
background check forms. Id. at 747. The Third Circuit applied reverse equitable estoppel to bind
Noye to arbitrate his claims against J&J pursuant to his agreement with the agency because:

20

[The agency] provide[d] recruitment and placement services to J&J. Noye
interviewed for a placement with J&J at [the agency’s] job fair, and Noye received
his offer to work at J&J through a[n] [agency] recruiter in an email bearing the
subject line “Offer from J&J through [Agency] Services.” [The Agency] was
authorized to use J&J logos and trademarks on employment forms it relayed to
Noye, and Noye received information and documents related to the onboarding
process from [the agency] in an email with the subject line “[Agency] Services
J[&]J [Hiring] Documents. . . .” These documents, including the [a]rbitration and
[e]mployment [a]greements and background check forms, were the vehicles to
place Noye, a[n] [agency] employee, with J&J.
...
Moreover, Noye’s complaint often refers to [the Agency] and J&J collectively as
“Defendants,” and accuses them of the same conduct . . . .
Id.
Here, “[a]lthough the Third Circuit has adopted the single factor test, . . . there is an obvious
and close nexus” between Defendants and the arbitration agreement (the FTP Policy), and
Defendants and the signatories (Plaintiff and non-parties AAHS, Paladin, and Freedman).
Richards, 2020 WL 2615688, at *4. Thus, accepting as true all allegations in the Amended
Complaint, there is an obvious and close nexus between the non-signatory Defendants and the FTP
Policy.
First, as to Defendants AAHS and Paladin, Plaintiff’s breach of contract claim (Count I)
against these entities establishes an obvious and close nexus with the FTP Policy. (See Doc. No.
22 ¶¶ 132-137.) In Count I, Plaintiff asserts claims against AAHS and Paladin (as well as PAHS)
for breach of the “written employment agreement,” i.e., the Offer Letter, and for violations of
promises contained therein. (Id. ¶ 53.) Because the FTP Policy and its arbitration provision are
indisputably part of the Offer Letter, see Section II.A, supra, Plaintiff’s breach of contract claims
against AAHS and Paladin provide the requisite nexus. See Richards, 2020 WL 2615688, at *4;
see also Noye, 765 F. App’x at 746 (alterations in original) (citations omitted) (“When examining

21

the nexus with the contract, some courts consider whether the claims at issue are ‘inextricably
entwined with the [c]ontract,’ . . . or ‘stem[ ] from the same incident and implicate[ ] identical
legal principles[.]’”); Devon Robotics v. Deviedma, No. 9-3552, 2009 WL 4362822, at *4 (E.D.
Pa. Nov. 30, 2009) (“[Reverse estoppel] generally applies when a signatory to the written
agreement must rely on the terms of the agreement to assert its claim against the non-signatory
such that the signatory’s claims make reference to or presume the existence of the written
agreement, or the signatory’s claims arise out of and relate directly to the written agreement.”).
Second, as to Defendant Freedman, Plaintiff’s claims against him provide the requisite
nexus. The claims are for violation of the PWPCL (Count III), fraudulent inducement (Count IV)
and promissory estoppel/detrimental reliance (Count V). (See Doc. No. 22 ¶¶ 143-53, 154-61,
162-68.)

Under Count III, Plaintiff claims Freedman violated the PWPCL by failing to

compensate her pursuant to several provisions of the Offer Letter, including “severance pay of 6
months” and reimbursement expenses. (Id. ¶¶148; see also id. ¶¶ 143-53.)
Regarding Count IV, Plaintiff alleges she “reli[ed] upon the promises contained in the
Offer Letter” in resigning from her position with a world-class organization, selling her house, and
relocating to begin working for the Company. (Id. ¶ 58.) These facts form the basis of Plaintiff’s
fraudulent inducement claim against Freedman in Count IV. (See id. ¶¶ 154-61) (claiming
Freedman made fraudulent misrepresentations regarding the terms and conditions of Plaintiff’s
employment upon which she relied, inducing her to “leave a lucrative position and relocate” and
resulting in damages set forth in the Amended Complaint).
In Count V, Plaintiff refers to promises contained in the Offer Letter regarding 6 months
of severance pay and a “significant bonus upon completion of the IT go-live project” in asserting
a claim against Freedman for promissory estoppel/detrimental reliance. (See id. ¶ 164; see also id.

22

¶¶ 162-63, 165-68.) Accordingly, Plaintiff’s reliance on the Offer Letter in asserting claims against
non-signatories AAHS and Paladin in Count I and non-signatory Freedman in Counts III through
V establishes an “obvious and close nexus” between Defendants and the FTP Policy containing
the arbitration provision. Richards, 2020 WL 2615688, at *4.
The Amended Complaint also demonstrates an obvious and close nexus between
Defendants and signatory PAHS. Plaintiff alleges non-signatory Defendants AAHS and Paladin
and signatory PAHS “used their corporate identities interchangeably” in “operat[ing] as one single
business entity” and “shared resources, including employees, during [Plaintiff’s] employment.”
(Doc. No. 22 ¶¶ 21-23.) Further, Plaintiff claims she “was paid by AAHS” and “performed
significant work for and/or on behalf of PAHS, AAHS and Paladin.” (Id. ¶ 24.) During this time,
non-signatory Defendant Freedman was the “Owner, Chairman and [CEO] of PAHS and AAHS”
who supervised Plaintiff in her role as CIO. (See id. ¶ 1.) Plaintiff avers in her Response that
PAHS is “a subsidiary of AAHS, which is in turn a subsidiary of Paladin and all three of which
are owned by Mr. Freedman.” (Doc. No. 24-2 at 10.) Thus, the Amended Complaint also
establishes the requisite nexus between the non-signatory Defendants and signatory PAHS.
For these reasons, Defendants, despite being non-signatories to the FTP Policy, can enforce
the arbitration clause as to Plaintiff under the doctrine of alternative equitable estoppel.
C.

Plaintiff’s Claims are Subject to a Valid and Enforceable Arbitration Clause

Plaintiff’s claims against Defendants are subject to a valid and enforceable arbitration
provision such that this case will be stayed pending arbitration. To determine whether a party may
be compelled to arbitrate under the FAA, the Court “first consider[s] (1) whether there is a valid
agreement to arbitrate between the parties and, if so, (2) whether the merits-based dispute in
question falls within the scope of that valid agreement.” Sanford, 618 F. App’x at 117 (quotation

23

marks omitted) (quoting Flintkote Co. v. Aviva PLC, 769 F.3d 215, 220 (3d Cir. 2014)). “When
determining both the existence and the scope of an arbitration agreement, there is a presumption
in favor of arbitrability.” Trippe Mfg. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005).
1.

The Arbitration Clause is Valid and Enforceable

The FTP Arbitration Provision is valid and enforceable under Pennsylvania law. Under
the FAA, the Court must enforce an arbitration agreement that is otherwise valid and enforceable
under ordinary contract principles of the relevant state law. See China Minmetals Materials Imp.
& Exp. Co., Ltd. v. Chi Mei Corp., 334 F.3d 274, 290 (3d Cir. 2003); Alexander v. Anthony Int’l,
L.P., 341 F.3d 256, 264 (3d Cir. 2003); Parilla v. IAP Worldwide Servs., VI, Inc., 368 F.3d 269,
275-76 (3d Cir. 2004). In doing so, the Court may separately assess the validity or enforceability
of an arbitration clause within an otherwise valid agreement. See Quilloin v. Tenet HealthSystem
Philadelphia, Inc., 673 F.3d 221, 229 (3d Cir. 2012) (“[R]egardless of whether a contract as a
whole is valid, agreements to arbitrate are severable from a larger contract, and may therefore be
separately enforced and their validity separately determined.”).
As previously stated, the parties do not dispute that Pennsylvania law governs the instant
agreement. (See Doc. Nos. 23-2 at 23; 24-2 at 9.) Nor do they dispute the validity of the FTP
Policy and Arbitration Provision. (See Doc. Nos. 23-2 at 12-16; 24-2 at 10.) Rather, Plaintiff
argues the FTP Arbitration Provision is unenforceable because it is unconscionable and for this
reason should be severed from the rest of the agreement. (See Doc. No. 24-2 at 10.)
Under Pennsylvania law, a plaintiff must show both procedural and substantive
unconscionability in order to void an arbitration provision. See Hopkins v. New Day Fin., 643 F.
Supp. 2d 704, 716 (E.D. Pa. 2009); Harris v. Green Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir.
1999). Procedural unconscionability refers to the process by which an agreement is entered into.
See Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224, 228 (3d Cir. 2008); Hopkins, 643 F.
24

Supp. 2d at 716-17. Substantive unconscionability asks whether the provision unreasonably favors
the party asserting it. See Quilloin, 673 F.3d at 230.
In her Response to the Motion, Plaintiff argues the FTP Arbitration Provision is both
procedurally and substantively unconscionable. (See Doc. No. 24-2 at 8-13.) She contends the
provision is procedurally unconscionable because it is an unenforceable adhesion contract. (See
id. at 10-11.) As to substantive unconscionability, Plaintiff argues that the terms of the FTP
Arbitration Provision grossly favor Defendants by reserving their right to litigate its potential
claims against Plaintiff while forcing Plaintiff to arbitrate her potential claims against them. (See
id. at 11-13.)
a.

The Arbitration Clause is Not Procedurally Unconscionable

“The Pennsylvania Supreme Court has defined procedural unconscionability as the
‘absence of meaningful choice on the part of one of the parties.’” Hopkins, 643 F. Supp. 2d at 717
(quoting Witmer v. Exxon Corp., 434 A.2d 1222, 1228 (Pa. 1981)). “Procedural unconscionability
is generally found where there is a contract of adhesion—a contract prepared by a party with
excessive bargaining power and presented to the other party on a ‘take it or leave it’ basis.” Id.
(citing Denlinger, Inc. v. Dendler, 608 A.2d 1061, 1068 (Pa. 1992)). However, a disparity in
bargaining power alone does not necessarily rise to the level of procedural unconscionability. See
Quilloin, 673 F.3d at 235; see also Denlinger, 608 A.2d at 1067 (quotation marks omitted) (quoting
Witmer, 434 A.2d at 1228) (stating that Pennsylvania Supreme Court and federal courts have
“refused to hold contracts unconscionable simply because of a disparity in bargaining power.”).
“The general test is whether the party challenging the agreement had any meaningful choice
regarding the acceptance of its provisions.” Hopkins, 643 F. Supp. 2d at 717.
Plaintiff contends that the FTP Arbitration Provision is an unenforceable adhesion contract

25

because, as an employee contracting with a sophisticated corporate entity, she was in a weaker
bargaining position than Defendants and because she was required to accept the provision as a
condition of employment on a “take it or leave it” basis. (See Doc. No. 24-2 at 10-11.)
In response, Defendants submit that the allegations in the Amended Complaint detailing
an extensive recruitment and negotiation process between the parties prior to Plaintiff’s acceptance
of the FTP Arbitration Provision “dispel[] any notion that [Plaintiff] was somehow in a weaker
bargaining position than [Defendants].” (Doc. No. 25 at 4.) They argue that Plaintiff “did not lack
a meaningful choice in accepting the challenged arbitration provision and the FTP [Policy] was
not procedurally unconscionable.” (Id.) (footnote omitted).
In Hopkins v. New Day Financial, 643 F. Supp. 2d 704 (E.D. Pa. 2009), this Court found
an arbitration provision presented to employees of a mortgage company was unconscionable
because, inter alia, the employees lacked meaningful choice about whether to accept the provision.
Id. at 718. The Court found that the plaintiffs, though mostly college educated, lacked sufficient
bargaining power because they “did not have alternative employment options and had already
committed to working, or were working” for the defendant when they were presented with the
arbitration agreement. Id. Moreover, this Court concluded that the “take it or leave it” nature of
the agreement was shown, as the plaintiffs believed their refusal to sign the mandatory arbitration
provision would result in their termination. Id.
Under the circumstances, the Hopkins plaintiffs were unable to adequately review the
arbitration agreement or consult with counsel prior to signing it, as they were directed to execute
a large pile of documents containing the agreement, were given between 30 minutes and one hour
total to do so and were told that none of the documents could leave the room with them. See id.
at 709-13. Moreover, the employees felt as though they could not ask questions about the provision

26

and believed that if they refused to sign it, they would be fired. See id. Thus, the degree of
economic compulsion motivating the plaintiffs’ acceptance of the provision in Hopkins was clear.
This case is distinguishable from Hopkins because Plaintiff was in an equal, if not greater,
bargaining position than Defendants. Unlike the college-educated plaintiffs in Hopkins, Plaintiff
here is a “highly skilled and accomplished [IT] executive with extensive experience in her field.”
(Doc. No. 22 ¶ 25.) Prior to her employment with the Company and her acceptance of the terms
of employment, Plaintiff was an Associate CIO at a “nationally renowned healthcare organization
. . . consistently among the top-grossing hospitals in the United States and highly regarded in the
area of technological management systems.” (Id. ¶¶ 25-26.)
The Amended Complaint recounts an extensive recruitment and negotiation process
between the parties before Plaintiff accepted the Offer Letter and FTP Policy. (See id. ¶¶ 31-36.)
Plaintiff alleges Defendant Freedman “aggressively recruited” her for the CIO position over a
period of many months. (Id. ¶ 31; see also id. ¶¶ 32-36.) During this period, she successfully
negotiated terms of her employment with the Company, including a total annual compensation
package “commensurate with her expectations,” which included a “substantial” annual salary and
“significant” bonuses. (Id. ¶¶ 55-56.) She also had the opportunity to meet with the Company’s
executive board to better understand its financial position, which aided Plaintiff in her decision
about whether to leave her current position with a “world-class organization.” (Id. ¶ 44; see also
id. ¶ 42.)
The facts further show that Defendants may have been in a weaker bargaining position than
Plaintiff, as the Company was relying heavily on her industry expertise in spearheading the IT golive project. (See id. ¶¶ 47, 56.) This intensive project, which Plaintiff would oversee as the new
CIO, would require a complete overhaul and reconstruction of the Company’s current IT systems

27

in order to “build a new foundation/department.” (Id. ¶ 47.)
Plaintiff and Freedman discussed Freedman’s goals and expectations for this project and
the IT Department in a one-on-one meeting before Plaintiff accepted the CIO position. (See id. ¶¶
43-48.) The Amended Complaint states that Freedman understood Plaintiff would be leaving a
“nationally renowned” company in order to help him build a new IT system for his “start-up
healthcare organization.”

(Id. ¶¶ 31, 42, 44.)

In doing so, Plaintiff would be potentially

responsible for an IT budget of approximately $6,000,000, but Freedman told her that “he would
defer to [Plaintiff’s] expertise in this regard” and “would make the right investments” in the IT
Department because it was “so critical to the Company’s needs.” (Id. ¶¶ 46, 48.) For these reasons,
the Amended Complaint, when viewed in the light most favorable to Plaintiff, shows that she
wielded significant bargaining power in negotiating her CIO position with the Company.
In addition, the FTP Arbitration Provision was not presented to Plaintiff on a “take it or
leave it basis.” Plaintiff argues that Defendants presented her with the provision on a “take it or
leave it basis” because she was required to sign it as a condition of her employment with the
Company, and its language shows it is a “generic contract presented to each employee” without
any opportunity to negotiate its terms. (See Doc. No. 24-2 at 10-11.) In their Reply, Defendants
submit that the Amended Complaint does not allege that Plaintiff “attempted, but was not
permitted, to negotiate the inclusion of the FTP [Arbitration Provision] the same way she
negotiated her salary and other terms.” (Doc. No. 25 at 4 n.3.)
Unlike the plaintiffs in Hopkins, Plaintiff was not already financially committed to the
Company when she signed the agreement, and she had an opportunity to review the provision and
consult with counsel. The Amended Complaint alleges that, “[i]n reliance upon the promises
contained in the Offer Letter, and the other promises made to her by . . . Freedman, [Plaintiff]

28

resigned from her stable position with a world-class organization, sold her house, relocated and
began working for the Company.” (Doc. No. 22 ¶ 58.) Thus, when presented with the FTP Policy
and its arbitration provision, Plaintiff was employed as a technology executive at an organization
“consistently among the top-grossing hospitals in the United States and highly regarded in the area
of technological management systems.” (Id. ¶ 26.) Because Plaintiff did not resign from her
current position until after she executed the Offer Letter and Acknowledgment Form, she was not
financially committed to the Company at the time she accepted the FTP Arbitration Provision.
Moreover, in the Amended Complaint, Plaintiff alleges she received a copy of the Offer
Letter on July 20, 2018 (see Doc. No. 22 ¶ 53) and, in her Response to the Motion, she does not
dispute that she countersigned it on the same day. (See Doc. Nos. 23-2, Ex. 1 ¶ 6; Doc. No. 24-2
at 4.) As noted, the FTP Policy and Arbitration Provision were attached to the Offer Letter, see
Section II.A, supra, and Plaintiff admits executing the Acknowledgment Form in which she
“acknowledged receiving a copy of the [FTP Policy] and agreed to be bound by it.” (Doc. No. 232, Ex. 1 ¶ 8; see also Doc. No. 24-2 at 4.) But, unlike the plaintiffs in Hopkins, Plaintiff was
provided with a copy of the agreement and had an opportunity to review it and consult counsel
prior to signing it. She was not required to sign it on the same day. Therefore, “[t]his is not a case
where a plaintiff with ‘limited educational background, narrow options for employment, and little
bargaining power is presented with an agreement on a take-it or leave-it basis.’” Lucey v. FedEx
Ground Package Systems, Inc., 305 F. App’x 875, 878 (3d Cir. 2009).
Because Plaintiff was in a strong bargaining position with Defendants and was not
presented with the FTP Arbitration Provision on a “take it or leave it basis,” the agreement is not
procedurally unconscionable.

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b.

The Arbitration Clause is Not Substantively Unconscionable

As noted above, Plaintiff must establish both procedural and substantive unconscionability
to void the FTP Arbitration Provision. Despite the FTP Arbitration Provision lacking procedural
unconscionability, the Court will still address whether the Provision was substantively
unconscionable. “Substantive unconscionability refers to contractual terms that are unreasonably
or grossly favorable to one side and to which the disfavored party does not assent.” Harris, 183
F.3d at 181.
Plaintiff argues the FTP Arbitration Provision is substantively unconscionable because it
“unilaterally provides PAHS the benefits of arbitration for all of [Plaintiff’s] potential claims,
while reserving to PAHS the right to seek relief in court for claims that are important to PAHS.”
(Doc. No. 24-2 at 11.) Specifically, she asserts the provision requires arbitration of “nearly all of
the potential claims and controversies” that Plaintiff would likely bring against PAHS as her
employer, while PAHS, on the other hand, “has reserved to itself the ability to litigate . . . . all of
the claims that it might envision bringing against” Plaintiff as its employee for breach of the RCA’s
restrictive covenants. (Id. at 12-13.)18
In response, Defendants argue that Plaintiff’s argument is “contradict[ed] [by] the plain
text of the [provision], which requires both [Plaintiff] and PAHS to arbitrate all employmentrelated disputes and binds both parties to the result.” (Doc. No. 25 at 4-5.) Moreover, they submit
that the RCA’s reservation of Defendants’ right “to bring certain claims in court does not render
the [FTP Arbitration Provision] substantively unconscionable.” (Id. at 5.)
Here, the provision is not substantively unconscionable for two reasons. First, the FTP

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The RCA contains non-disclosure, non-competition, and non-solicitation provisions. (See
Doc. No. 24-3 ¶¶ 2-4.)
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Arbitration Provision binds both parties, by providing that:
An employee’s decision to accept employment or to continue employment
constitutes his or her agreement to be bound by the FTP. Likewise, the Company
agrees to be bound by the FTP. This mutual agreement to arbitrate claims means
that both the employee and the Company are bound to use the FTP process as the
only means of resolving employment-related disputes, and thereby agree to forego
any right they each may have had to a jury trial on issues covered by the FTP.
(Doc. No 23-2, Ex. 1 ¶ 7 & Ex. B at 1) (emphasis added).
The provision clearly states that both Plaintiff, as employee, and the Company, as
employer, “agree[] to be bound by the [FTP Policy].” (Id.) The FTP Policy contains the FTP
Arbitration Provision, which requires arbitration of all “disputes, claims or controversies that a
court of law would be authorized or have jurisdiction over to grant relief and that in any way arise
out of, relate to or are associated with [Plaintiff’s] employment with the Company or the
termination of employment.” (Id., Ex. 1 ¶ 7 & Ex. B at 3; see also Doc. No. 24-2 at 12.)
Accordingly, the FTP Arbitration Provision requires both Plaintiff and Defendants to arbitrate all
claims related to Plaintiff’s employment and/or termination.
Second, Defendants have an apparent business justification for excluding from mandatory
arbitration equitable relief with respect to a breach or potential breach of the RCA. See Salley v.
Option One Mortgage Corp., 925 A.2d 115, 128-29 (Pa. 2007) (holding that one party’s reservation
of court access for foreclosure actions does not create a presumption of unconscionability where
there is an “apparent business justification” for excluding such actions from arbitration). As
written in the RCA:
[Plaintiff] agrees and acknowledges that the injury the [Company] would suffer
because of breach of the Non-Disclosure, Non-Solicitation or Non-Competition
in [sic] provisions would be irreparable and that an award of monetary damages
for breach would be an inadequate remedy. Consequently, the [Company] shall
have the right . . . to obtain injunctive relief from any court or arbitrable tribunal of
competent jurisdiction to restrain any breach or threatened breach or to specifically
enforce any provision of the Agreement . . .

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(Doc. No. 24-3 ¶ 5) (emphasis added).
Here, the “apparent business justification” for giving the Company the right “to obtain
injunctive relief” or “specifically enforce” the RCA is the irreparable injury that it would suffer
from any breach or potential breach of the RCA’s provisions. (Id.); see also Rivera v. PetSmart,
Inc., No. 18-2121, 2018 WL 5045380, at *6 n.8 (E.D. Pa. Oct. 17, 2018) (upholding arbitration
clause excluding “claims for injunctive relief to protect confidential information or to enforce
restrictive covenants”). Moreover, the agreement reserves to PAHS the right to litigate only one
cause of action—“injunctions related to the breach of the RCA.” (Doc. No. 25 at 5).
For the reasons set forth above, the terms of the arbitration agreement do not unreasonably
favor Defendants and the FTP Arbitration Provision is not substantively unconscionable. Because
the parties do not dispute that the arbitration agreement is a valid contract and the Court finds that
there is no basis to find that it is unconscionable, the FTP Arbitration Provision is valid and
enforceable.
2.

Plaintiff’s Claims Fall Within the Scope of the Arbitration Clause

Because the FTP Arbitration Provision is valid and enforceable under Pennsylvania law,
the final inquiry in resolving the Motion is whether Plaintiff’s claims fall within the scope of that
provision. See Trippe Mfg., 401 F.3d at 532. Since the FTP Arbitration Provision covers all
claims asserted in the Amended Complaint, the Court must compel arbitration.
The FTP Arbitration Provision provides that it:
[C]overs all disputes relating to or arising out of an employee’s employment with
the Company or the termination of employment. . . . Examples of the type of
disputes or claims covered by the FTP include, but are not limited to, . . . tort claims
or any other legal claims and causes of action recognized by local, state or federal
law or regulations.
(Doc. No 23-2, Ex. 1 ¶ 7 & Ex. B at 1) (emphasis added).

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Despite the scope of coverage, Plaintiff contends that her claims for interference with
prospective contractual relations (Count VII) and defamation (Count X) are not covered by the
“language requiring . . . all claims relating to or arising from [Plaintiff’s] employment or her
termination be arbitrated” because they arise out of post-termination conduct by Defendants. (See
Doc. No. 24-2 at 13.) Thus, she argues, the Court should not compel arbitration of these claims.
(See id.)
In response, Defendants set forth established Third Circuit law revealing that nearly
identical language to that contained in the FTP Arbitration Provision has been held to
“encompass[] claims that arise after an employee is terminated, so long as the claim ‘relat[es] to
or aris[es] out of’ the employee’s employment or termination.” (Doc. No. 25 at 8); see also Wood
v. Prudential Ins. Co. of America, 207 F.3d 674, 680-81 (3d Cir. 2000) (holding agreement
requiring arbitration of “any dispute, claim or controversy . . . . arising out of the [plaintiff’s]
employment or termination of employment” covered post-termination claims for defamation and
intentional infliction of emotional distress based upon the employer’s statements and conduct
regarding the plaintiff’s employment activities and circumstances surrounding his termination).
“When determining whether a given claim falls within the scope of an arbitration
agreement, a court must ‘focus on the factual allegations in the complaint rather than the legal
causes of action asserted.’” Varallo v. Elkins Park Hosp., 63 F. App’x 601, 603 (3d Cir. 2003)
(citation omitted). “If these factual allegations ‘touch matters’ covered by the parties’ contract,
then those claims must be arbitrated, whatever the legal labels attached to them.” Id. (citation
omitted). Moreover, “[a]s a matter of federal law, any doubts concerning the scope of arbitration
should be resolved in favor of arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Const.
Corp., 460 U.S. 1, 24-25 (1983); see also AT & T Techs., Inc. v. Comms. Workers of America,

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475 U.S. 643, 650 (1986) (“[A]n 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 asserted dispute.”). Accordingly, phrases such as “arising under”
and “arising out of” in arbitration provisions are broadly construed to cover post-termination
conduct that gives rise to employment or termination-related claims. See Battaglia v. McKendry,
233 F.3d 720, 727 (3d Cir. 2000); see also Varallo, 63 F. App’x at 603-04 (holding district court
improperly denied motion to compel arbitration as to claim arising after the date of plaintiff’s
termination where the facts underlying the claim were “inextricably intertwined” with events
surrounding her employment and termination).
Here, Plaintiff’s prospective contractual interference (Count VII) and defamation (Count
X) claims “relate to or arise out of” her employment or termination with Defendants. In Count
VII of the Amended Complaint, Plaintiff claims the Company made defamatory statements to
others in her industry, which tortiously interfered with her prospective contractual relationships
with third parties. (See Doc. No. 22 ¶ 177.) Although Plaintiff claims the defamatory statements
were made after her termination, it appears from the Amended Complaint that Defendants defamed
her, in part, before her termination. (See id. ¶ 102.) Thus, this claim does not exclusively arise
out of post-termination conduct by Defendants. In any event, the alleged defamation concerned
Plaintiff’s termination, which plainly “relates to or arises out of” her employment and/or
termination. (See id.); see also Varallo, 63 F. App’x at 602 n.1, 604 (post-termination claims
“inextricably intertwined” with events surrounding a plaintiff’s employment and termination are
covered by an agreement providing for arbitration of “any and all claims and disputes that are
related in any way to . . . employment or the termination of . . . employment”).
Accordingly, Plaintiff’s claims in Counts VII and X of the Amended Complaint “relate to

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or arise[] out of” her employment or termination and are covered by the language of the FTP
Arbitration Provision. Plaintiff may be compelled to arbitrate these claims despite the fact that
they arose from Defendants’ conduct after she was terminated.
For the reasons above, Plaintiff’s claims against Defendants in the Amended Complaint
are subject to the valid and enforceable arbitration provision, and the Court will compel arbitration
of Plaintiff’s claims.
IV.

CONCLUSION
For the foregoing reasons, Defendants’ Second Motion to Compel Arbitration and Stay

Proceedings (Doc. No. 23) will be granted. This case will be stayed pending the outcome of
arbitration. An appropriate Order follows.

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