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The Pennsylvania Supreme Court will not review a state Superior Court ruling that refused to send a dispute between partners of a medical practice to arbitration.

In Gardner v. Vascular Access Centers, a three-judge Superior Court panel consisting of Judges Anne Lazarus and Deborah Kunselman and Senior Judge James Colins affirmed a ruling in April from the Delaware County Court of Common Pleas denying the defendant's motion to compel arbitration.

On Nov. 12, the Supreme Court denied allocatur in the case.

The suit involves allegations from limited partners of Vascular Access Centers that the defendant practice and its owner and general partner Dr. James McGuckin (the general partners) breached the limited partnership agreement when McGuckin secretly named himself as the CEO of the practice and siphoned off "millions of dollars of VAC's profits without the limited partners' knowledge or approval," according to Kunselman's opinion.

After two years of discovery, the defendants moved to compel arbitration based on a clause in the employment agreement for the CEO position to which McGuckin hired himself. The trial court, however, held that the lack of notice and consent on the part of the other partners meant that they could not be held to the arbitration clause in that agreement.

The defendants then filed the interlocutory appeal. The Superior Court's analysis focused on only one of the general partners' three points, "Does this action fall within the scope of the arbitration provision, because the limited partners seek to submit the employment agreement at trial and argue that Dr. McGuckin breached that agreement?"

The defendants argued that the language of the arbitration clause was broad enough to merit its application. They further claimed that the scope of arbitration in the case was unlimited.

However, Kunselman disagreed.

"Arbitration does not supplant the courts of common pleas as forums of unlimited jurisdiction over every conceivable case or controversy that might arise between the parties," Kunselman said. "An arbitrator has only limited, subject-matter jurisdiction over claims that truly arise out of or relate to the contract that contains the arbitration clause."

Kunselman also said the focus of the general partners' arguments was off-point, noting that the relevant issue in the case was not whether McGuckin breached the CEO employment agreement, but whether he breached his fiduciary duty to the limited partners.

"Whether Dr. McGuckin breached the CEO employment agreement is irrelevant to whether the general partners breached the preexisting, limited partnership agreement or their fiduciary duties. The employment agreement is only evidence that general partners breached the limited-partnership agreement, because the limited partners claim that, by hiring himself as CEO, Dr. McGuckin violated the preexisting contract," Kunselman said. "Whether he discharged his duties under the employment agreement thereafter is irrelevant to whether his self-hiring was unlawful from the start. Here, the general partners claim that the formation of the employment contract itself was a breach of the prior contract. Thus, this dispute arises out of and relates to the parties' prior contract, not their new one."

The general partners' counsel, David Heim of Bochetto & Lentz in Philadelphia, did not respond to a request for comment.

The limited partners' counsel, Richard Coe of Drinker Biddle & Reath in Philadelphia, also did not respond to a request for comment.