Respondent, Anita Ellis, was hired by Petitioners in March, 2011 as an assistant manager. Respondent signed an arbitration agreement providing that “all claims or controversies…past, present, or future, including without limitation, claims arising out of my application for employment, assignment/employment, and/or the termination of my assignment/employment” would be resolved by arbitration. The agreement expressly stated that claims subject to arbitration included “tort or statutory claims for discrimination (including, but not limited to…workers compensation).”
In April, 2014, Respondent suffered a work injury and received temporary total disability benefits from April 23 through May 15. In November, 2014, Petitioners terminated Respondent’s employment citing work absences. Thereafter, Respondent reopened her workers compensation claim and received temporary total disability benefits from May through December, 2014. Respondent then filed suit against Petitioners alleging that they had illegally terminated her employment in violation of the antidiscrimination provisions of the state’s workers compensation law.
Petitioner moved to compel arbitration and argued that all issues involving the scope or enforceability of the arbitration agreement were delegated to the arbitrator. Respondent opposed the motion citing three grounds: (1) the delegation clause was ambiguous, (2) the delegation clause was unconscionable, and (3) the delegation clause violated West Virginia law, i.e., W.Va. Code §23-2-7. The trial court denied the motion, finding that the arbitration agreement was unconscionable.
Whether the trial court correctly applied state contract law and federal arbitration law in finding that the arbitration agreement was unconscionable?
Justice Walker, writing for the court, set forth the analysis that must be followed in cases challenging a delegation clause.
(a) Is there clear and unmistable intent?
Under Schumacher of Circleville, Inc. v. Spencer, 237 W.Va. 379, 787 S.E.2d 650 (2016), “[p]arties are only bound to arbitrate those issues that by clear and unmistakable writing they have agreed to arbitrate.”
In this case, the delegation clause expressly stated that the “arbitrator…shall have exclusive authority to resolve any dispute relating to the interpretation, application, enforceability or formation of this agreement.” The Supreme Court noted that it had previously examined this exact same language in Schumacher, finding it to be “an example of a clear delegation provision.” Accordingly, the language was found to express a clear and unambiguous intent “to delegate the issue of arbitrability to the arbitrator.”
(b) Is the clause valid?
Here, the parties must address the question of whether the delegation clause is enforceable under general principles of state contract law. In this case, Respondent argued that the delegation clause was unconscionable and that it violated W.Va. Code 23-2-7.
Under West Virginia law, issues involving unconscionability require an analysis of both procedural and substantive unconscionability.
Regarding procedural unconscionability, Respondent pointed to the following: (1) the gross disparity in bargaining power and sophistication, (2) the fact that the arbitration agreement was a preprinted, form contract that was presented to Respondent on a take-it-or-leave-it basis, and (3) the circumstances under which she signed, notably, the fact that she signed multiple employment forms “in quick succession” and had no understanding that she was actually signing an arbitration agreement.
Citing Nationstar Mortgage, LLC v. West, 237 W.Va. 84, 785 S.E.2d 634 (2016), the Supreme Court rejected each of these arguments. Instead, the court insisted that “a party to a contract has a duty to read the instrument” and that a failure to read a contract will not relieve a party from its “binding effect.”
Regarding substantive unconscionability, Respondent argued that the delegation clause violated W.Va. Code 23-2-7 because it effectively “exempt[ed]” Petitioners from the duties and obligations of the workers compensation law. The Court, however, found that Respondent’s argument was aimed at the arbitration agreement as a whole and not the delegation clause. In other words, Respondent was attacking the part of the agreement “requiring arbitration of her underlying workers compensation discrimination claim.” Because this was not an issue involving the delegation clause itself, it was “for the arbitrator to decide.”
Justice Workmen issued a begrudging concurrence. As in previous cases, she recognized that federal arbitration law was “trump[ing]” the right to a jury trial: “I will continue to express my judicial disdain for these mandatory arbitration agreements prepared by sophisticated businesses and forced upon people as a condition of employment.”
Justice Workman is absolutely right. Federal arbitration law has provided an easy way for powerful and well-heeled companies to deprive ordinary West Virginians of their right to a jury trial--even in cases involving discrimination and other protected statutory rights.
More than that, it seems that our general law of contracts is being tainted in the process. Unconscionability should be a bulwark protecting us from oppressive or underhanded tactics in the marketplace. Here, a high school graduate was supposed to read, comprehend, and voice any objection she had to a slew of employment papers written by the legal staff of a $2 billion corporate giant. Buried within those papers was an arbitration agreement. Petitioners made no effort to single out the arbitration agreement or to explain what arbitration was. Despite these facts and others that drew the whole process of contract formation into question, the Court refused to make a finding of unconscionability.
In the rush to see that federal arbitration law is followed, I’m afraid that our own unconscionability principles--and their important protections--have been seriously weakened. Will this trend continue? We are watching three other arbitration cases that should be decided by the end of the June term.