Did the trial court err in finding a contract to be unconscionable that was entered into over 30 years ago between two sophisticated corporate entities?
This case presents an unusual twist on unconscionability. Petitioner is Horizon Ventures of West Virginia (Horizon). Petitioner owns land on which Respondent, American Bituminous Power Partners, Inc. (ABPP), constructed a $150,000,000 power plant in Marion County. In 1987, Petitioner and Respondent entered into an agreement under which Respondent is required to pay Petitioner an annual consulting fee of $50,000. The fee is payable until (1) the plant ceases operating; or (2) the parties agree to terminate fee.
Unfortunately, the relationship between the parties deteriorated and they became embroiled in ongoing litigation. Respondent objected to continuing the annual consulting fee, but Petitioner refused to terminate it. Respondent then filed a complaint alleging that the annual consulting fee was unconscionable. The trial court did not find any procedural unconscionability. However, because the “escape terms” of the fee provision were so one-sided, the court found it to be “so outrageous and oppressive that public policy mandates the contract be disbanded rather than enforced.” Petitioner now appeals.
Petitioner argues that, under West Virginia law, a contract can only be voided on unconscionability grounds if both procedural and substantive unconscionability are present. Because the court conceded that the agreement was not procedurally unconscionable, its order voiding the agreement was erroneous.
Respondent argues that Petitioner failed to assert the issue of procedural unconscionability before the trial court and, therefore, the issue has been waived for purposes of appeal. Even if the issue is addressed, there is evidence of procedural unconscionability--i.e., a failure of meeting of the minds. Furthermore, the trial court’s ruling is based on sound public policy. In Respondent’s words, “it is commercially unreasonable and against public policy to make an inescapable contract.”
Because this case is set for Rule 19 argument, it is unlikely to generate a new syllabus point. It will be interesting to see if the Supreme Court sticks to its guns and requires a showing of both procedural and substantive unconscionability under the circumstances of this particular case.