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Hampden Coal LLC v. Varney

Hampden Coal LLC v. Varney

Case No. 
17-0088
Opinion Date: 
2/14/2018
Opinion Author: 
Chief Justice Loughry
Decision 
Reversed
Vote: 
Unanimous
Facts 

In 2000, Mr. Varney began working for Hampden Coal Company, LLC. The assets of Hampden Coal Company, LLC were purchased by the petitioner, Hampden Coal, LLC (“Hampden Coal”) in August of 2014, after which all employees were transitioned to Hampden Coal. Mr. Varney's employment with Hampden Coal, as well as that of all employees, was conditioned upon his signing a Mutual Arbitration Agreement. Through this one and one-half-page Arbitration Agreement, which the parties signed on September 3, 2014, Hampden Coal and Mr. Varney jointly consented to submit all past, present or future disputes that arose between them to final and binding arbitration. The agreement specifically included a waiver of any right to go to court to resolve disputes; however the arbitration agreement contained this language: “This Agreement does not, however, limit any right to file a charge with or assist any government agency, including the EEOC and the NLRB, or the right to file a claim for workers' compensation benefits or unemployment insurance compensation; nor does it apply to employment benefit plans regulated by the Employee Retirement Income Security Act.”

The parties also agreed that a claim for arbitration must be filed “within the same time period that they would have to file a lawsuit in court or one-year from the date of the event forming the basis of the lawsuit, whichever expires first.” The parties expressly waived any and all limitation periods to the contrary, according to the agreement. Consideration for the agreement is described therein as the parties' mutual promises to arbitrate any disputes between them and Hampden Coal's “employment and continued employment” of Mr. Varney, “as well as, the benefits and compensation provided by Hampden Coal.” Above the space indicated for signatures, the Agreement provides in bold lettering: “This Mutual Arbitration Agreement contains legally binding promises. Please seek legal advice, of your choosing, instead of signing this Agreement if you do not understand or have questions about any part of this Agreement.”

On June 21, 2016, Mr. Varney instituted this civil action against Hampden Coal and Oliver Hunt, his supervisor, in the Circuit Court of Mingo County, alleging a deliberate intent claim under West Virginia Code § 23-4-2, related to his workplace injury in January 2016, for which he had been awarded workers' compensation benefits, as well as two violations of the West Virginia Human Rights Act arising out of Hampden Coal's and Mr. Hunt's alleged decision to demote Mr. Varney following an illness that required hospitalization in December 2015. In response to the complaint, the petitioners filed a motion to dismiss or, in the alternative, compel arbitration.

Following briefing by the parties and a hearing before the circuit court during which the parties presented oral argument only, the circuit court denied the motion. In its order entered on December 29, 2016, the circuit court observed that “[n]either party submitted any affidavits or testimony for the record[,]” after which it found that the parties' arbitration agreement is an employment contract; that arbitration agreements are viewed differently in an employment context in comparison to a commercial context; that the agreement is a contract of adhesion; that the language in the agreement instructing Mr. Varney to seek legal advice if he did not understand or had questions about the Agreement is disingenuous; that the Agreement is invalid because it lacks consideration; that the agreement is both substantively and procedurally unconscionable; that the deliberate intent claim falls outside the scope of the Agreement, which provides that it “does not limit any right to file a claim for workers' compensation benefits[;]” and that the Human Rights Act claims fall outside the scope of the Agreement which provides that it “does not limit any right to file a charge with or assist any government agency, including the EEOC and the NLRB[.]” This appeal followed.

Issue 

(1) Whether arbitration agreements are viewed differently within the employment context compared to the commercial context;
(2) Whether the parties’ agreement created an employment contract;
(3) Whether the arbitration agreement was not supported by sufficient 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.

Analysis 

The Court reversed the remanded the Circuit Court’s decision with instructions to dismiss and compelled arbitration. In examining and rejecting all of Mr. Varney’s claims, the Court considered not only the record, but also a number of its prior decisions.

First, the Court wholly rejected the notion that different or more stringent rules apply when considering arbitration agreements in the employment context. The Court found no support for this contention in prior decisions, and it refused to accept Mr. Varney’s arguments that employment agreements should be different.

The Court determined that a mutual agreement to arbitrate is sufficient consideration to support an arbitration agreement, reaffirming its memorandum decision in Toney v. EQT Corp., No. 13-1011, 2014 WL 2681091 (W.Va. June 13, 2014). The Court concluded that the mutual promises to arbitrate alone constituted sufficient consideration for the modification of the contract that added an arbitration provision.

The Court offered more guidance on contractual unconscionability, finding neither procedural nor substantive unconscionability on this record. The Court stated that Mr. Varney’s arguments of inferior bargaining power were unpersuasive and not supported by the record. The Court indicated that even if he had proven the facts alleged about his lack of bargaining power, the Court’s handling of similar allegations in other cases would provide no relief to Mr. Varney. Even though the Court determined that there was no evidence in the record to support Mr. Varney’s claims, the Court’s opinion makes it clear that a valid, enforceable agreement to arbitrate is neither substantively nor procedurally unconscionable.

The deliberate intent arguments attempting to carve out a court case that Varney might pursue similarly were rejected, as were the arguments that the arbitration agreement was itself an employment contract.

Commentary 

The Court has provided specific guidance on, and has indicated its support for, the availability of binding arbitration. Further, it has laid to rest any arguments that arbitration clauses in the employment context should be treated differently. The Court noted that it applies “the same legal standards to our review of all arbitration agreements,” even if they involve employees. Its express determination that the mutual agreement to arbitrate is itself sufficient consideration for the use of an arbitration agreement – and not unconscionable – makes it very difficult to make an unconscionability argument in any case. In fact, the Court made its views quite clear in noting, “[a]s we have previously explained, there is nothing inherently wrong with a contract of adhesion. Most of the transactions of daily life involve such contracts that are drafted by one party and presented on a take it or leave it basis. They simplify standard transactions.”

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