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Hampden Coal, LLC and Oliver Hunt v. Michael R. Varney

Hampden Coal, LLC and Oliver Hunt v. Michael R. Varney

Case No. 
17-0088
Type of Proceeding: 
Appeal from the Circuit Court of Mingo County (Judge Pratt)
Issues: 

(1) Whether the Circuit Court properly found that arbitration agreements are viewed differently within the employment context compared to the commercial context;
(2) Whether the Circuit Court erred in concluding that the parties’ agreement created an employment contract;
(3) Whether the Circuit Court properly determined that the agreement was not supported by consideration;
(4) Whether the deliberate intent statute, W. Va. Code § 23-4-2, and the Human Rights Act, W. Va. Code § 5-11-1, fell outside the agreement, and
(5) Whether the agreement was substantively and procedurally unconscionable.

Background: 

This case originally was brought in Circuit Court by Michael Varney against Hampden Coal, LLC and Oliver Hunt, alleging employment disability discrimination. Michael Varney, who was injured while working, alleged that his removal from his supervisory position and his reduction in pay the day after he returned to work from his illness, as well as his workplace injury that occurred two-weeks after his return to work, constituted disability discrimination. Mr. Varney’s employment was ultimately terminated. Mr. Varney filed a complaint against petitioners alleging two violations of the West Virginia Human Rights Act related to his demotion and termination and one “deliberate intent” claim related to the workplace injury that he sustained. This suit was met with a motion to dismiss or in the alternative to compel arbitration, based upon an agreement signed by Mr. Varney. The arbitration agreement provided that all disputes and claims related to employment termination must be submitted for arbitration and filed with the American Arbitration Association. The agreement stated that it did not limit any right to file a charge with or assist any government agency, including the EEOC and the NLRB, or limit any right to file a change with any government agency. The agreement similarly did not purport to limit any rights to file for workers’ compensation benefits. The agreement also contained language that provided that the agreement “shall not be construed to create a contract of employment” and “shall not alter [Varney’s] at will employment status.

The Circuit Court found that the agreement was an employment agreement, and that employment agreements are viewed differently within the employment context as compared to the commercial context. Although finding that the agreement was an employment agreement, the court also found that it was not a proper contract because, under West Virginia law, the agreement was not supported by sufficient consideration because it was not bargained for and because it lacked mutuality. The court accepted plaintiff’s arguments that the agreement was both procedurally and substantively unconscionable, reasoning that the language of the agreement created an unenforceable contract of adhesion. Furthermore, the court found that plaintiff’s deliberate intent claim as well as his claims under the Human Rights Act were excluded for the scope of the agreement.

Positions of the Parties: 

(Petitioners—Hampden Coal and Oliver Hunt)

Petitioners contend that the Circuit Court erred by finding that arbitration agreements are viewed differently within the employment context as compared to the commercial context and that there is no precedent supporting the Circuit Court’s ruling to the contrary. They also argue that the clear language of the agreement stating that it is “not an Employment Agreement” completely disposes of the issue whether the agreement is an employment contract. Therefore, even if employment agreements were entitled to different treatment, the agreement at issue would not so qualify. Petitioners maintain that the agreement to arbitrate is supported by sufficient consideration under West Virginia law holding that mutual agreements to arbitrate constitute sufficient consideration to support formation of a contract.

Regarding the Circuit Court’s finding that the deliberate intent claim fell outside the scope of the agreement, petitioners contend that this is contrary to the legislative intent of the statute that a deliberate intent cause of action is to exist as a narrow exception to the workers’ compensation benefits system. Petitioners also argue that unconscionability was not demonstrated here, either procedurally or substantively, noting that there is no factual record to support those findings.

(Respondent—Michael R. Varney)

Respondent challenges each of Petitioners’ contentions. He maintains that under the Federal Arbitration Act, the authority of the trial court is limited to determining the threshold issues of whether a valid arbitration agreement exists and whether the claims averred by the plaintiff fall within the substantive scope of the arbitration agreement. Respondent asserts that in this case, he claims that the agreement itself is not valid; however, if the court determines that the agreement is in fact valid, respondent’s claims simply are not within the substantive scope of the agreement.

Respondent argues in the alternative that if the court determines that the agreement is valid, his claims are not within the substantive scope covered by the agreement and thus not required to be submitted for arbitration. Respondent notes that his claims under the West Virginia Human Rights Act are derived and controlled by administrative law, and that any waiver of rights mist be knowing and voluntary. Respondent expressly challenges the notion that there was any voluntary waiver. He also argues that his deliberate intent claim is excluded from the agreement because arbitration is a matter of contract, and a party cannot be required to arbitrate a dispute that it has not agreed to arbitrate.

Probable Impact: 

The Supreme Court is well-positioned to provide guidance on several issues. Particularly, if the Court agrees that arbitration agreements are viewed differently within the employment context, specific guidance addressing those differences could be forthcoming. Further guidance on the inclusion of Human Rights Acts claims and deliberate intent claims as part of arbitration clauses also seems probable.

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