IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2014 Term
FILED
March 7, 2014
released at 3:00 p.m.
No. 13-0379 RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
WAYNE KIRBY and JOYCE KIRBY,
Plaintiffs Below, Petitioners
v.
LION ENTERPRISES, INC. and T/A BASTIAN HOMES,
Defendants Below, Respondents
Appeal from the Circuit Court of Marion County
The Honorable David R. Janes, Judge
Civil Action No. 12-C-47
AFFIRMED, IN PART;
REVERSED, IN PART, AND REMANDED
Submitted: January 28, 2014
Filed: March 7, 2014
Gregory T. Hinton, Esq. Lee R. Demosky, Esq.
Fairmont, West Virginia Meyer, Darragh, Buckler,
Attorney for the Petitioners Bebenek & Eck, P.L.L.C.
Greensburg, Pennsylvania
Attorney for the Respondents
JUSTICE WORKMAN delivered the Opinion of the Court.
JUSTICE KETCHUM concurs and reserves the right to file a concurring opinion.
SYLLABUS BY THE COURT
1. “Appellate review of a circuit court’s order granting a motion to dismiss
a complaint is de novo.” Syl. Pt. 2, State ex rel. McGraw v. Scott Runyon Pontiac-Buick, Inc.,
194 W. Va. 770, 461 S.E.2d 516 (1995).
2. “When a trial court is required to rule upon a motion to compel
arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1–307 (2006), the authority
of the trial court is limited to determining the threshold issues of (1) whether a valid
arbitration agreement exists between the parties; and (2) whether the claims averred by the
plaintiff fall within the substantive scope of that arbitration agreement.” Syl. Pt. 2, State ex
rel. TD Ameritrade, Inc. v. Kaufman, 225 W. Va. 250, 692 S.E.2d 293 (2010).
3. “The formation of a contract with multiple clauses only requires
consideration for the entire contract, and not for each individual clause. So long as the
overall contract is supported by sufficient consideration, there is no requirement of
consideration for each promise within the contract, or of ‘mutuality of obligation,’ in order
for a contract to be formed.” Syl. Pt. 6, Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281,
737 S.E.2d 550 (2012).
i
4. The law enunciated in syllabus point six of Dan Ryan Builders, Inc. v.
Nelson, 230 W. Va. 281, 737 S.E.2d 550 (2012), that “the formation of a contract with
multiple clauses only requires consideration for the entire contract, and not for each
individual clause” modified the law set forth in Board of Education v. W. Harley Miller, Inc.,
160 W. Va. 473, 236 S.E.2d 439 (1977), to the extent that an arbitration clause in a contract
need not be specifically “bargained for.”
5. “The doctrine of unconscionability means that, because of an overall and
gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified in
refusing to enforce the contract as written. The concept of unconscionability must be applied
in a flexible manner, taking into consideration all of the facts and circumstances of a
particular case.” Syl. Pt. 12, Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W. Va.
646, 724 S.E.2d 250 (2011), overruled in part on other grounds sub nom. Marmet Health
Care Ctr., Inc. v. Brown, 132 S. Ct. 1201 (2012).
6. “‘An analysis of whether a contract term is unconscionable necessarily
involves an inquiry into the circumstances surrounding the execution of the contract and the
fairness of the contract as a whole.’ Syllabus Point 3, Troy Mining Corp. v. Itmann Coal Co.,
176 W. Va. 599, 346 S.E.2d 749 (1986).” Syl. Pt. 13, Brown ex rel. Brown v. Genesis
ii
Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011), overruled in part on other
grounds sub nom. Marmet Health Care Ctr., Inc. v. Brown, 132 S. Ct. 1201 (2012).
iii
Workman, Justice:
This case is before the Court upon the appeal of the Petitioners, Wayne Kirby
and Joyce Kirby, from the March 15, 2013, order entered by the Circuit Court of Marion
County, West Virginia, granting a motion to dismiss and compelling arbitration in favor of
the Respondents Lion Enterprises, Inc., and T/A/ Bastian Homes (referred to collectively as
“Bastian Homes”). The Petitioners argue that the circuit court erred in concluding that: 1)
the arbitration provision was “bargained for”; 2) the arbitration provision was “fairly
negotiated”; and 3) the Petitioners’ claims are within the terms of the arbitration provision.
Based upon a review of the parties’ briefs and oral arguments, the appendix record, and all
other matters submitted before the Court, we affirm the decision of the circuit court, in part,
and reverse, in part, and remand for further development on the issue of unconscionability.
I. Facts and Procedural History
On March 16, 2009, the Petitioners entered into a written agreement with
Bastian Homes for the construction of a new home in Fairmont, West Virginia. The
agreement contained an arbitration clause, which required that
[t]he parties hereby agree and acknowledge that in the event any
disagreement or dispute shall arise pertaining to the terms of this
Agreement, all matters and controversies shall be submitted to
a board of arbitrators, which shall consist of three (3) members
one of whom shall be chosen by the Contractor, one of whom
1
shall be chosen by the Owner and the third shall be chosen by
the two designees.1
1
The full arbitration clause set forth in paragraph 19 of the agreement provided:
19. ARBITRATION: The parties hereby agree and
acknowledge that in the event any disagreement or dispute shall
arise pertaining to the terms of this Agreement, all matters and
controversies shall be submitted to a board of arbitrators, which
shall consist of three (3) members one of whom shall be chosen
by the Contractor, one of whom shall be chosen by the Owner
and the third shall be chosen by the two designees. Each of the
board of arbitrators shall be a qualified residential contractor (or
a substantially similar classification of arbitrator as maintained
by the American Arbitrator Association) having an office and/or
conducting a primary amount of its work within a reasonable
radius of the Bastian Homes office in which this Agreement
originated. The aforesaid arbitration shall be conducted in
accordance with the rules of the American Arbitration
Association and shall be held in the Bastian Homes office in
which that Agreement originated or such other mutually
acceptable office. The determination of the board of arbitrators
shall be final and binding upon the parties hereto and not subject
to appeal, in the absence of fraud, and the prevailing party may
enforce the determination by application for entry of judgment
in any court of competent jurisdiction or by other procedures
established by law. The cost of the board of arbitrators and the
attorney’s fees of the prevailing party shall be paid by the losing
party. Notwithstanding anything contained herein to the
contrary, the responsible party agrees to pay to the other party or
any required third party any amounts which are not in dispute.
Any amounts which are in dispute and subject to arbitration
shall be paid by the responsible party into an interest bearing
escrow account mutually established by the parties at a bank or
other financial institution and the funds shall be released to the
parties in accordance with the board of arbitrator's
determination.
2
Bastian Homes, in turn, subcontracted with Ed Dwire, doing business as Dwire
Plumbing (“Dwire Plumbing”), to provide the plumbing service necessary for the home being
constructed. Before the new home was fully constructed, there was a water leak that
allegedly substantially damaged major portions of the partially-constructed home.
On February 3, 2012, the Petitioners filed a complaint against Bastian Homes
and Dwire Plumbing, alleging that when their home was under construction it sustained
substantial damage and there was a ten-month delay in completion of the home caused
completely by the joint negligence of Bastian Homes and Dwire Plumbing.
Bastian Homes moved to dismiss the complaint on the basis that the arbitration
clause in the construction contract required the parties to submit the matter to arbitration.
Bastian Homes relied upon this Court’s decision in Board of Education v. W. Harley Miller,
Inc., 160 W. Va. 473, 236 S.E.2d 439 (1977) (“Harley Miller II”)2 in support of its motion.3
2
As a backdrop to Harley Miller II, in Board of Education v. W. Harley Miller, Inc.,
159 W. Va. 120, 221 S.E.2d 882 (1975) (“Harley Miller I”), this Court made great strides
in advancing the law of arbitration by determining that a contractual obligation to submit a
dispute to arbitration creates a condition precedent to a right of action upon the contract. Id.
The Harley Miller I decision removed from the jurisprudence of this state the notion under
common law that “a party could revoke its promise to submit to arbitration at any time before
[an] award.” Id. at 122, 221 S.E.2d at 883.
3
In Harley Miller II, the case was again before the Court upon a certified question.
The question posed was “whether the circuit court has jurisdiction to enforce an arbitration
award upon a motion for summary judgment by the party prevailing at arbitration.” 160 W.
(continued...)
3
Bastian Homes argued that under Harley Miller II, “the contract between the parties was
bargained for and each party has provided consideration for the contract. Specifically, the
Kirbys agreed to pay Bastian for its work in constructing the dwelling under the contract and
Bastian agreed to perform according to the contract.” (Emphasis added); see 160 W. Va. at
473-74, 236 S.E.2d at 440-41; see also supra note 3.
3
(...continued)
Va. at 474, 236 S.E.2d at 441. The Court answered the question in the affirmative. Id. at
473, 236 S.E.2d at 440, Syl. Pt. 2 (“Where, in the absence of fraud, an arbitration award has
been made by arbitrators pursuant to a bargained-for arbitration provision, the award is
enforceable by a motion for summary judgment upon a complaint setting forth the contract,
the arbitration provision, and the award of the arbitrators.”). The Court also held in syllabus
point one and three of Harley Miller II that:
Where parties to a contract agree to arbitrate either all
disputes, or particular limited disputes arising under the
contract, and where the parties bargained for the arbitration
provision, such provision is binding, and specifically
enforceable, and all causes of action arising under the contract
which by the contract terms are made arbitrable are merged, in
the absence of fraud, into the award of the arbitrators.
It is presumed that an arbitration provision in a written
contract was bargained for and that arbitration was intended to
be the exclusive means of resolving disputes arising under the
contract; however, where a party alleges that the arbitration
provision was unconscionable, or was thrust upon him because
he was unwary and taken advantage of, or that the contract was
one of adhesion, the question of whether an arbitration provision
was bargained for and valid is a matter of law for the court to
determine by reference to the entire contract, the nature of the
contracting parties, and the nature of the undertakings covered
by the contract.
Id. at 473-74, 236 S.E.2d at 440-41, Syl. Pts. 1 and 3.
4
The Petitioners filed a memorandum in opposition to the motion to dismiss.
The Petitioners argued, based upon Harley Miller II, that the arbitration clause at issue was
not “bargained for” and was therefore invalid. In support of their position, the Petitioner
Wayne Kirby stated in an affidavit that he was presented with the contract containing the
arbitration clause, that he “raised objection” to the arbitration clause with William Burkett
of Bastian Homes and that he was “told not to worry about it because they were bonded.”
Further, he stated that “it was pointed out to me that Bastion [sic] Homes would correct or
repair any defects in workmanship if discovered by either of us and submitted to Bastion [sic]
Homes within a year of possession of said home . . . .”4
The parties agreed to the circuit court deciding the motion to dismiss without
any hearing. In an order entered March 15, 2013, the circuit court, relying upon Harley
4
The Petitioners also argued that their claims do not fall within the provisions of the
construction agreement. We summarily reject the Petitioners’ argument on this issue. The
Petitioners maintain that they have a right to sue Ed Dwire, doing business as Ed Dwire
Plumbing “for negligence irrespective of the construction agreement between the petitioners
and the respondent.” That is not the issue that was before the court below or now on appeal
to this Court. The issue is whether the arbitration clause, which provides that “[t]he parties
hereby agree and acknowledge that in the event any disagreement or dispute shall arise
pertaining to the terms of this Agreement, all matters and controversies shall be submitted
to a board of arbitrators, . . .” governs the claims pursued against Bastian Homes by the
Petitioners. The Petitioners have alleged that Bastian Homes is jointly liable for the alleged
negligence of the plumbing subcontractor that was hired by Bastian Homes as a result of the
construction contract between the Petitioner and Bastian Homes. It is clear that the
Petitioners’ claims against Bastian Homes constitute a “dispute . . . pertaining to the terms
of” the construction contract.
5
Miller II, determined that the Petitioner’s claims were subject to arbitration. The circuit court
found that “[a]fter reviewing the entire contract, the nature of the contracting parties and the
parties’ bargaining positions, . . . the arbitration provision was fairly negotiated and is not
unconscionable, having not been presented with evidence sufficient for overcoming the
general presumption that all arbitration provisions are bargained for.” This appealed
followed.
II. Standard of Review
“Appellate review of a circuit court’s order granting a motion to dismiss a
complaint is de novo.” Syl. Pt. 2, State ex rel. McGraw v. Scott Runyon Pontiac-Buick, Inc.,
194 W. Va. 770, 461 S.E.2d 516 (1995). Further,
[w]hen a trial court is required to rule upon a motion to
compel arbitration pursuant to the Federal Arbitration Act, 9
U.S.C. §§ 1–307 (2006), the authority of the trial court is limited
to determining the threshold issues of (1) whether a valid
arbitration agreement exists between the parties; and (2) whether
the claims averred by the plaintiff fall within the substantive
scope of that arbitration agreement.
Syl. Pt. 2, State ex rel. TD Ameritrade, Inc. v. Kaufman, 225 W. Va. 250, 692 S.E.2d 293
(2010).
Applying the foregoing standard of review, we consider the parties’ arguments.
6
III. Discussion
A. Improper Application of Harley Miller II
We first address the issue of whether the circuit court correctly found that
the arbitration provision was “bargained for” under the law established in Harley Miller
II. See 160 W. Va. at 473-74, 236 S.E.2d 440-41, Syl. Pts. 1 and 3. The Petitioners
argued that there was no valid arbitration agreement between the parties because the
arbitration agreement was not “bargained for.” In resolving the issue, we acknowledge
that in Harley Miller II, the Court held in 1977 that an arbitration provision contained
within a contract must be “bargained for.” See id.; see also supra note 3 (setting forth full
text of syllabus point). The Court also established a presumption that when “an arbitration
provision in a written contract was bargained for . . . that arbitration was intended to be
the exclusive means of resolving disputes arising under the contract[.]” Id., Syl. Pt. 3; see
supra note 3 (setting forth full text of syllabus point).
Harley Miller I and Harley Miller II were important decisions insofar as
they greatly advanced the law of arbitration in this State in the 1970s.5 Both decisions,
5
See Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 670-71 nn.
52 & 57, 724 S.E.2d 250, 274-75 nn. 52 & 57 (2011), overruled in part on other grounds sub
nom. Marmet Health Care Ctr, Inc. v. Brown, 132 S. Ct. 1201 (2012) (referring to Harley
Miller II as setting forth “[t]he West Virginia common-law corollary to Section 2 [of the
FAA]” and recognizing that prior to Harley Miller II, the Court routinely held in our cases
that “‘[a]t common law an agreement to submit to arbitration was revocable at any time
(continued...)
7
however, were rendered without the benefit of and guidance set forth in United States
Supreme Court opinions6 that followed the Harley Miller cases and addressed the
applicability of the Federal Arbitration Act (“FAA”), 9 United States Code Annotated §§
1 to 16 (West 2009), to arbitration agreements. Subsequent to those more recent United
States Supreme Court decisions, we discussed the applicability of the FAA to arbitration
agreements in this State in State ex rel. Richmond American Homes of West Virginia, Inc.
v. Sanders, 228 W. Va. 125, 717 S.E.2d 909 (2011), as follows:
We begin by discussing the applicable law relating to
the FAA. In Brown v. Genesis Healthcare Corp ., [228 W.
Va. 646, 727 S.E.2d 250 (2011), overruled in part on other
grounds sub nom. Marmet Health Care Center, Inc. v. Brown,
132 S. Ct. 1201 (2012)], we noted that the “primary
5
(...continued)
before [an] award. . . . A contract to submit future differences to arbitration is not
binding.’”).
6
See Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281 (1995) (“In any
event, § 2 gives States a method for protecting consumers against unfair pressure to agree to
a contract with an unwanted arbitration provision. States may regulate contracts, including
arbitration clauses, under general contract law principles and they may invalidate an
arbitration clause ‘upon such grounds as exist at law or in equity for the revocation of any
contract.’ 9 U.S.C. § 2 (emphasis added). What States may not do is decide that a contract
is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to
enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of
policy would place arbitration clauses on an unequal ‘footing,’ directly contrary to the Act’s
language and Congress’ intent. See Volt Information Sciences, Inc., 489 U.S. [468], at 474,
109 S.Ct. [1248], at 1253 [(1989)].”); Southland Corp. v. Keating, 465 U.S. 1 (1984)
(deciding that Congress would not have wanted state and federal courts to reach different
outcomes about the validity of arbitration in similar cases and concluding that the FAA
preempts state law).
8
substantive provision” of the FAA is Section 2.7 We
interpreted Section 2 as saying that “a written provision to
settle by arbitration a controversy arising out of a contract that
evidences a transaction affecting interstate commerce is valid,
irrevocable, and enforceable, unless the provision is found to
be invalid, revocable or unenforceable upon a ground that
exists at law or in equity for the revocation of any contract.”
In other words, Section 2 contains two parts: “the first part
holds that written arbitration agreements affecting interstate
commerce are ‘valid, irrevocable, and enforceable,’ but the
second part is a ‘savings clause’ that allows courts to
invalidate those arbitration agreements using general contract
principles.”
The purpose of the FAA is to impel “courts to treat
arbitration agreements like any other contract. The Act does
not favor or elevate arbitration agreements to a level of
importance above all other contracts; it simply ensures that
private agreements to arbitrate are enforced according to their
terms.”
Richmond Am. Homes, 228 W. Va. at 133, 717 S.E.2d at 917 (footnote added and
footnotes omitted).
Since recognizing the interplay of the FAA with arbitration agreements in
this State, the Court was presented in Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281,
737 S.E.2d 550 (2012), with a certified question from the United States Court of Appeals
7
See 9 U.S.C.A. § 2 (“A written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction, or the refusal to perform the whole or any part
thereof, or an agreement in writing to submit to arbitration an existing controversy arising
out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any contract.”).
9
for the Fourth Circuit, which resolves the issue currently before the Court. In Dan Ryan,
the Fourth Circuit posed the following question: “Does West Virginia law require that
an arbitration provision which appears as a single clause in a multi-clause contract, itself
be supported by mutual consideration when the contract as a whole is supported by
adequate consideration?” Id. at 283, 737 S.E.2d at 552.
In answering this question, this Court first recognized that “[t]he elements
of a contract are an offer and an acceptance supported by consideration.” Id. at 287, 737
S.E.2d at 556 (citing First Nat’l Bank of Gallipolis v. Marietta Mfg. Co., 151 W. Va. 636,
153 S.E.2d 172 (1967); see New v. Gamestop, Inc., ___ W. Va. ___, ___, 753 S.E.2d 62,
71 2013) (“West Virginia contract law requires mutual assent to form a valid contract. . . .
‘“In order for this mutuality to exist, it is necessary that there be a proposal or offer on the
part of one party and an acceptance on the part of the other. Both the offer and
acceptance may be by word, act or conduct that evince the intention of the parties to
contract. That their minds have met may be shown by direct evidence of an actual
agreement. . . .”’) (citations and footnote omitted.)”). We then acknowledged that, just as
in the instant case wherein the Petitioner argues that the arbitration clause was not
“bargained for,”
parties to contracts frequently challenge the enforceability of
arbitration clauses--clauses which do not impose parallel
duties to arbitrate on both parties--on the ground that the
clauses lack consideration or lack equivalent promises (that is,
10
lack mutuality of obligation). However, the majority of courts
conclude that the parties need not have separate consideration
for the arbitration clause, or equivalent, reciprocal duties to
arbitrate, so long as the underlying contract as a whole is
supported by valuable consideration.
230 W. Va. at 288, 737 S.E.2d at 557. The Court held in syllabus point six of Dan Ryan
that
[t]he formation of a contract with multiple clauses only
requires consideration for the entire contract, and not for each
individual clause. So long as the overall contract is supported
by sufficient consideration, there is no requirement of
consideration for each promise within the contract, or of
“mutuality of obligation,” in order for a contract to be formed.
Id. at 283, 737 S.E.2d at 552.
Pursuant to our holding in Dan Ryan, when challenging the enforceability
because the arbitration clause was not supported by consideration, was not bargained for,
or was not negotiated for, the focus is not upon the consideration or bargain for the
singular arbitration clause. Instead, “[s]o long as the overall contract is supported by
sufficient consideration, there is no requirement of consideration for each promise within
the contract, or of ‘mutuality of obligation,’ in order for a contract to be formed.” Id.
Since the Harley Miller II decision, the law of arbitration in this State as set
forth in Harley Miller II has been largely preempted by the FAA as this Court has fully
explained in our more recent arbitration cases. See, e.g., Dan Ryan, 230 W. Va. at 282,
11
737 S.E.2d at 552, Richmond Am. Homes, 228 W. Va. at 133, 717 S.E.2d at 917. An
additional change that has occurred because of the preemption by the FAA, which we
recognized in Dan Ryan, is the lack of a legal requirement that the arbitration clause be
specifically “bargained for.” 230 W. Va. at 282, 737 S.E.2d at 552, Syl. Pt. 6.
Notwithstanding these clear changes in the law, the parties and the circuit
court continued to rely upon the principles enunciated in Harley Miller II,8 which was in
error. To prevent this continued adherence to the principles set forth in Harley Miller II
from occurring again in future cases, we hold that the law enunciated in syllabus point six
of Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281, 737 S.E.2d 550 (2012), that “the
formation of a contract with multiple clauses only requires consideration for the entire
contract, and not for each individual clause” modified the law set forth in Board of
Education v. W. Harley Miller, Inc., 160 W. Va. 473, 236 S.E.2d 439 (1977), to the extent
that an arbitration clause in a contract need not be specifically “bargained for.”
Consequently, while the circuit court determined that the arbitration clause
at issue had been “bargained for,” the determination was of no moment. Applying the
law enunciated in Dan Ryan, so long as the construction contract in its entirety is well
supported by an offer, acceptance and sufficient consideration, there is no requirement
8
See Harley Miller II, 160 W. Va. at 473, 236 S.E.2d at 440, Syl. Pt. 1 & 3.
12
that the arbitration clause be independently “bargained for” in order for a contract to be
formed. See 230 W. Va. at 282, 737 S.E.2d at 552, Syl. Pt. 6. In other words, the
Petitioner could not have defeated the arbitration clause based upon the argument that the
clause was not bargained for. Having reviewed the contract at issue, there is no question
that the entire contract is derived from an offer, acceptance and sufficient consideration.
Every page of the agreement was either signed by or initialed by the Petitioners, including
specific handwritten details for the home set forth in “Construction Agreement Detail,”
all of which demonstrates an offer and acceptance between the contracting parties.
Further, the construction contract is supported by sufficient consideration in the amount
of $179,371. Given our determination that the construction contract was properly formed
and supported by sufficient consideration, we affirm the circuit court’s determination on
this issue, even though it was reached for the wrong reason.9
9
See Cadle Co. v. Citizens Nat’l Bank, 200 W. Va. 515, 518, 490 S.E.2d 334, 337
(1997)(“We believe the circuit court reached the correct result in this case, but for the wrong
reasons. We agree with the court in Bank IV Topeka v. Topeka Bank & Trust Co., 15 Kan.
App.2d 341, 343, 807 P.2d 686, 688 (1991) that “‘“where the trial court reaches the correct
result based upon the wrong reason, this [C]ourt will affirm the trial court.’” Quoting, State
v. Shehan, 242 Kan. 127, 131, 744 P.2d 824 (1987).”); Syl. Pt. 5, Hustead ex rel. Adkins v.
Ashland Oil, Inc., 197 W. Va. 55, 475 S.E.2d 55 (1996) (“This Court may, on appeal, affirm
the judgment of the lower court when it appears that such judgment is correct on any legal
ground disclosed by the record, regardless of the ground, reason or theory assigned by the
lower court as the basis for its judgment.” Syl. Pt. 3, Barnett v. Wolfolk, 149 W. Va. 246, 140
S.E.2d 466 (1965).”).
13
B. Unconscionabilty
The next issue we are compelled to address is the circuit court’s
determination that the arbitration clause was neither procedurally or substantively
unconscionable. The circuit court made this determination as part of its ruling on the
Respondent’s motion to dismiss even though a review of the record plainly reveals that
this issue was not developed by the parties below.
The circuit court correctly stated in its order the law concerning
unconscionability insofar as a contract term must be both “procedurally10 and
substantively unconscionable[,]11” see Syl. Pt. 9, Brown ex rel. Brown v.Genesis
10
In syllabus point seventeen of Brown, we held:
Procedural unconscionability is concerned with
inequities, improprieties, or unfairness in the bargaining process
and formation of the contract. Procedural unconscionability
involves a variety of inadequacies that results in the lack of a
real and voluntary meeting of the minds of the parties,
considering all the circumstances surrounding the transaction.
These inadequacies include, but are not limited to, the age,
literacy, or lack of sophistication of a party; hidden or unduly
complex contract terms; the adhesive nature of the contract; and
the manner and setting in which the contract was formed,
including whether each party had a reasonable opportunity to
understand the terms of the contract.
228 W. Va. at 657, 724 S.E.2d at 261, Syl. Pt. 17.
11
We held in syllabus point nineteen of Brown that:
(continued...)
14
Healthcare Corp., 229 W. Va. 382, 729 S.E.2d 217 (2012) (footnote added),12 to be found
unenforceable. The circuit court then determined that the arbitration clause was not
unconscionable, finding that there was no procedural unconscionability “looking at the
four corners of the construction agreement,” and that “the terms set forth in the arbitration
provision are substantively fair.” The circuit court found that there was a lack of
evidence “tending to support a foundational claim for procedural or substantive
unconscionability.”
11
(...continued)
Substantive unconscionability involves unfairness in the
contract itself and whether a contract term is one-sided and will
have an overly harsh effect on the disadvantaged party. The
factors to be weighed in assessing substantive unconscionability
vary with the content of the agreement. Generally, courts should
consider the commercial reasonableness of the contract terms,
the purpose and effect of the terms, the allocation of the risks
between the parties, and public policy concerns.
228 W. Va. at 658, 724 S.E.2d at 262, Syl. Pt. 19.
12
As this Court held in Brown,
[a] contract term is unenforceable if it is both
procedurally and substantively unconscionable. However, both
need not be present to the same degree. Courts should apply a
“sliding scale” in making this determination: the more
substantively oppressive the contract term, the less evidence of
procedural unconscionability is required to come to the
conclusion that the clause is unenforceable, and vice versa.
228 W. Va. at 658, 724 S.E.2d at 262, Syl. Pt. 20.
15
This Court held in syllabus points twelve and thirteen of Brown:
The doctrine of unconscionability means that, because
of an overall and gross imbalance, one-sidedness or
lop-sidedness in a contract, a court may be justified in
refusing to enforce the contract as written. The concept of
unconscionability must be applied in a flexible manner, taking
into consideration all of the facts and circumstances of a
particular case.
“An analysis of whether a contract term is
unconscionable necessarily involves an inquiry into the
circumstances surrounding the execution of the contract and
the fairness of the contract as a whole.” Syllabus Point 3,
Troy Mining Corp. v. Itmann Coal Co., 176 W. Va. 599, 346
S.E.2d 749 (1986).
228 W. Va. at 657, 724 S.E.2d at 261, Syl. Pts. 12 and 13 (emphasis added).
A circuit court’s determination of unconscionability necessarily involves a
fact-intensive analysis into a range of factors. See id.; see also supra notes 10-12. “If
necessary, the trial court may consider the context of the arbitration clause within the four
corners of the contract, or consider any extrinsic evidence detailing the formation and use
of the contract.”
Richmond Am. Homes, 228 W. Va. at 913, 717 S.E.2d at 129, Syl. Pt. 4, in part. Yet, the
circuit court decided the issue of unconscionability in this case without the issue being
fairly argued by the parties and without any factual development. Given this lack of any
development below, both legally and factually, concerning unconscionability, we reverse
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the circuit court’s decision on this issue and remand for further development of the
record.
IV. Conclusion
Based upon the foregoing opinion, the decision of the circuit court is
affirmed, in part, and reversed and remanded for further proceedings consistent with this
opinion.
Affirmed, in part; reversed, in part, and remanded.
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