Hampden Coal, LLC v. Varney

• Decision Date: 16 February 2018
• Docket Number: No. 17-0088,17-0088
• Citation: 810 S.E.2d 286
• Court: West Virginia Supreme Court
• Parties: HAMPDEN COAL, LLC, and Oliver Hunt, Defendants Below, Petitioners v. Michael R. VARNEY, Plaintiff Below, Respondent

810 S.E.2d 286

HAMPDEN COAL, LLC, and Oliver Hunt, Defendants Below, Petitioners

v.Michael R. VARNEY, Plaintiff Below, Respondent

No. 17-0088

Supreme Court of Appeals of West Virginia.

Submitted: January 9, 2018

Filed: February 16, 2018

Ashley C. Pack, Esq., Jennifer J. Hicks, Esq., Dinsmore & Shohl PLLC, Charleston, West Virginia, Counsel for Petitioners

Nathan Brown, Esq., Ferrell & Brown, PLLC, Williamson, West Virginia, Counsel for Respondent

LOUGHRY, Chief Justice:

Hampden Coal, LLC and Oliver Hunt (defendants below; collectively "the petitioners"), appeal the Circuit Court of Mingo County’s order entered on December 29, 2016, through which it denied their motion to dismiss and compel arbitration in this action brought by the respondent (plaintiff below), Michael R. Varney, alleging a deliberate intent claim¹ and violations of the West Virginia Human Rights Act.² The petitioners assign error in the circuit court’s ruling that the parties’ arbitration agreement was unconscionable and lacked consideration and that Mr. Varney’s claims fell outside the scope of that agreement. Upon our review of the parties’ briefs, the arguments of counsel, the appendix record submitted, and the applicable law, we reverse the circuit court’s rulings and remand this action to the circuit court for entry of an order dismissing this civil action and compelling arbitration.

I. Facts and Procedural Background

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 employees were transitioned to Hampden Coal. Mr. Varney’s employment with Hampden Coal, as well as that of all employees, was conditioned upon him signing a Mutual Arbitration Agreement ("Agreement"). Through this one and one-half-page 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 arise between us to final and binding arbitration. This means that a neutral arbitrator will decide any legal dispute between us, instead of a judge or jury. The Federal Arbitration Act and the American Arbitration Association’s ("AAA") National Rules for the Resolution of Employment Disputes, then in effect,^{[3 ]} govern arbitrations under this Agreement. Hampden Coal and I waive our right to go to court in exchange for this right to arbitration.

(Footnote added). This Agreement further records the parties’ mutual assent to arbitrate

all disputes or claims of any kind includ[ing] but [ ] not limited to claims of unlawful discrimination, retaliation or harassment based upon race, national origin, ancestry, disability, religion, sex, age, workers’ compensation claims or history, veteran’s status, or any other unlawful reason, and all other claims relating to employment or termination from employment. This shall also include claims for wages or other compensation due, claims for breach of any contract, tort claims or claims based on public policy. 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 must be filed for arbitration "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 waive any and all limitation periods to the contrary." 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[.]"⁴ 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 2015.⁵ 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’ 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.

II. Standard of Review

The petitioners challenge the circuit court’s denial of their motion to dismiss and compel arbitration. In Credit Acceptance Corporation v. Front , 231 W.Va. 518, 745 S.E.2d 556 (2013), we held that "[a]n order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine." Id. at 519, 745 S.E.2d at 557, syl. pt. 1. Further, "[w]hen an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo ." Syl. Pt. 1, W.Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc. , 238 W.Va. 465, 796 S.E.2d 574 (2017). Our review is also plenary to the extent our analysis requires us to examine the circuit court’s interpretation of the parties’ Agreement. Zimmerer v. Romano , 223 W.Va. 769, 777, 679 S.E.2d 601, 609 (2009) ("[W]e apply a de novo standard of review to [a] circuit court’s interpretation of [a] contract."). This matter being properly before this Court, we proceed to determine whether the circuit court erred in refusing to compel arbitration.

III. Discussion

We begin by observing that "[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).⁶ Here, the circuit court denied the motion to compel arbitration, finding the parties’ Agreement to be invalid and unenforceable, and further finding that Mr. Varney’s claims fall outside the scope of the Agreement. The petitioners assign various errors in their challenge to these rulings, each of which we address below.

A. Whether Arbitration Agreements are viewed differently in an Employment Context

The petitioners assert that the circuit court cited no legal authority for its erroneous ruling that arbitration agreements are viewed differently in an employment context compared to a commercial context. They emphasize that this Court has routinely enforced arbitration agreements in the employment context under the same standards it applies to any arbitration agreement. Conversely, Mr. Varney argues that the circuit court’s ruling was correct. He relies upon Brown v. Genesis Healthcare Corp. , 229 W.Va. 382, 729 S.E.2d 217 (2012) (" Brown II "), in which this Court stated that courts "are more likely to find unconscionability in consumer transactions and employment agreements than in contracts arising in purely commercial settings involving experienced parties." Id . at 392-93, 729 S.E.2d at 227-28 (quoting Brown v. Genesis Healthcare Corp. , 228 W.Va. 646, 681, 724 S.E.2d 250, 285 (2011) (" Brown I "), overruled in part on other grounds by Marmet Health Care Ctr., Inc. v. Brown , 565 U.S. 530, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam) ).

The petitioners are correct in their argument that this Court has never held that more stringent or different standards apply to our consideration of arbitration agreements in different contexts, nor have we ever adopted separate rules or factors for consideration of arbitration agreements in the employment context. Rather, we have generally held that "[p]rocedural unconscionability involves a variety of inadequacies ... includ[ing], ... 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...