Horizon Ventures of W. Va., Inc. v. Am. Bituminous Power Partners, L.P.

• Decision Date: 01 April 2021
• Docket Number: No. 19-0171,19-0171
• Court: West Virginia Supreme Court
• Parties: HORIZON VENTURES OF WEST VIRGINIA, INC., a West Virginia Corporation, Plaintiff Below, Petitioner v. AMERICAN BITUMINOUS POWER PARTNERS, L.P., Defendant Below, Respondent

857 S.E.2d 33

HORIZON VENTURES OF WEST VIRGINIA, INC., a West Virginia Corporation, Plaintiff Below, Petitioner

v.AMERICAN BITUMINOUS POWER PARTNERS, L.P., Defendant Below, Respondent

No. 19-0171

Supreme Court of Appeals of West Virginia.

Submitted: February 9, 2021

Filed: April 1, 2021

Mark A. Kepple, Bailey & Wyant, PLLC, Wheeling, West Virginia, Attorney for the Petitioner.

John F. McCuskey, Roberta F. Green, Shuman, McCuskey, & Slicer PLLC, Charleston, West Virginia, Attorneys for the Respondent.

Jenkins, Chief Justice:

On June 25, 1987, Petitioner Horizon Ventures of West Virginia ("Horizon") and Respondent American Bituminous Power Partners ("AMBIT") entered into a Contract and Agreement ("consulting agreement") whereby Horizon was to "provide expertise and consulting services" to AMBIT in exchange for the annual sum of $50,000.00 "as long as [the AMBIT Grant Town Power Plant] continues to produce power." The parties operated under this agreement from 1987 until 2018 when AMBIT refused to continue to pay Horizon. Upon this refusal to pay, Horizon instituted a breach of contract action against AMBIT. After a limited amount of discovery, in its order dated January 30, 2019, the circuit court granted AMBIT's motion for summary judgment finding that the consulting agreement was substantively unconscionable and violative of public policy. On appeal, Horizon asserts that the circuit court erred by finding the consulting agreement to be unconscionable. AMBIT contends to the contrary that the circuit court correctly resolved the matter by finding the consulting agreement substantively unconscionable and granting it summary judgment.

Upon careful consideration of the briefs and arguments of counsel, the record accompanying the appeal, the pertinent facts, and the relevant law, we find that the circuit court erred in finding the consulting agreement unconscionable without finding both procedural and substantive unconscionability. Accordingly, we reverse the summary judgment order and remand the case for further proceedings consistent with this opinion.

I.FACTUAL AND PROCEDURAL HISTORY

The parties entered into a consulting agreement on June 25, 1987.¹ The relevant portions of the consulting agreement are as follows. AMBIT was "engaged in a venture of establishing one or more electric power plants in the State of West Virginia[.]" The parties "negotiated an agreement wherein [Horizon] will provide expertise and consulting services within its field to [AMBIT] in its projects in West Virginia[.]" In particular, it was agreed that Horizon

[w]ill perform from time to time upon the reasonable request of [AMBIT], such public and governmental relations and liaison functions as are necessary or incident to aiding and assisting [AMBIT] in locating, permitting, licensing, developing, maintaining[,] and operating power plants in the State of West Virginia and will further aid in such other ventures as locating coal "gob" and all like coal resources when the same may be needed by [AMBIT].

In exchange for these services, AMBIT agreed to pay an initial sum of $50,000.00 once AMBIT had completed the construction of its initial power plant, the Grant Town Power Plant in Grant Town, West Virginia. AMBIT agreed to pay the same $50,000.00 sum each succeeding year "as long as said power plant continue[d] to produce power." The consulting agreement "set[ ] forth the entire understanding and agreement between the parties. It may not be amended, terminated[,] or otherwise changed except by a writing signed by both parties." Lastly, the consulting agreement was "binding on the parties [ ], their successors[,] and assigns."² The president of AMBIT, Richard J. Halloran ("Mr. Halloran"), signed the consulting agreement on behalf of AMBIT, and Horizon's then-president, Andrew Noshagya, Jr. ("Mr. Noshagya"), signed it on behalf of Horizon.³

For approximately the next thirty years, the parties operated pursuant to the consulting agreement. However, by 2017, AMBIT asserts that the parties’ relationship had deteriorated and Horizon had filed various lawsuits against AMBIT.⁴ On December 26, 2017, Horizon sent AMBIT its annual invoice for the $50,000.00, pursuant to the consulting agreement, requesting that the money be paid no later than January 15, 2018.⁵ By letter dated January 27, 2018, AMBIT's executive director responded to Horizon noting that their relationship had become "considerably strained over the past several years due primarily to the ongoing litigation." Additionally, AMBIT stated that it

ha[s] been engaged before the [Public Service Commission] in a battle for [its] very existence, and part of that process has mandated that [it] review every invoice with an eye to value for services rendered. With that in mind, we have taken a frank and full look at the relationship between us and at the Consulting Agreement. Given the realities of both, we believe the Consulting Agreement has no value to [AMBIT] and that it is time to disband the Agreement and simplify our relationship to just landlord-tenant.

On May 14, 2018, as a result of AMBIT's failure to pay the annual $50,000.00, Horizon filed a complaint for breach of contract in the Circuit Court of Marion County. Essentially, the complaint recounted the terms of the consulting agreement. Furthermore, the complaint alleged the following: (1) AMBIT has paid the amount due under the agreement to Horizon each and every year since the parties entered the agreement in 1987; (2) Horizon "has and remains able and ready to perform under the contract[;]" and (3) AMBIT has failed to pay Horizon for the current year in breach of the consulting agreement.

AMBIT responded to the complaint on June 13, 2018, with a motion to dismiss or, in the alternative, for summary judgment ("motion to dismiss") pursuant to Rules 12(b)(6) and 56 of the West Virginia Rules of Civil Procedure. AMBIT articulated several arguments to support the motion to dismiss, including but not limited to that the contract at issue was not enforceable because it was unconscionable, violated public policy, and was impossible to perform given that its purpose had been frustrated and the circumstances between the parties had changed. In reply, Horizon filed a memorandum in opposition and an affidavit of its current president, Stanley Sears ("Mr. Sears"), stating that he is familiar with the consulting agreement; that Horizon "stands ready[,] able[,] and willing to perform in good faith;" and that "the goals of the parties to the [c]ontract are similar and that ... it is in the best interest of both parties to keep the Grant Town Power Plant operated by [AMBIT] open, viable, and profitable."

A hearing on the motion to dismiss was held on August 7, 2018. By order dated August 14, 2018, the circuit court denied the motion to dismiss and deferred ruling on the motion for summary judgment until discovery in the matter had been conducted. Subsequently, on September 13, 2018, Mr. Sears, as president of Horizon, was deposed, and on November 30, 2018, Horizon's Rule 30(b)(7) deposition of Mr. Halloran, president of AMBIT, was conducted.

AMBIT filed a renewed motion for summary judgment in November 2018,⁶ based on several grounds. First, similar to the previous motion to dismiss, AMBIT asserted that the consulting agreement was "unenforceable as written because it is unconscionable, violative of public policy[,] and impossible to perform, given the frustration of its purpose and the changed circumstances between the parties." Relevant to this appeal, AMBIT averred that the circuit court should "refuse to enforce the Agreement based solely on the substantive unfairness of the agreement between the parties." (Footnote omitted). Horizon filed a response in opposition asserting only that the motion for summary judgment should not be granted at this stage because discovery had just begun and additional discovery was necessary. AMBIT filed a reply.

On December 6, 2018, the circuit court held a hearing on the renewed motion for summary judgment. The circuit court granted the motion for summary judgment by order entered on January 30, 2019. In its order, the circuit court observed that the renewed motion for summary judgment was based on numerous grounds. The circuit court further noted that while "there may or may not be issues of fact were the case to survive summary judgment, the [c]ourt's decision turns wholly on a determination of law and thus, is ripe for summary judgment." Specifically, the circuit court based its decision "on its finding that the contract between the parties is unconscionable." It found AMBIT's remaining positions to be "too weighted in factual determinations for the [c]ourt to consider for purposes of summary judgment. The [c]ourt's decision [wa]s made only on one narrow issue of law."

With regard to unconscionability, the circuit court explained that pursuant to the law of West Virginia, the court must "analyze unconscionability of a contract term in terms of two component parts: procedural unconscionability and substantive unconscionability." The circuit court went on to find that

[n]either party assert[ed] that the relative positions of the parties or the adequacy of the bargaining positions by either party in 1987 was unconscionable. There is no allegation that sufficient experience, education, training, ability, or knowledge was lacking by either party at the initiation of the contract. Therefore, the focus of the Court's analysis is one of substantive unconscionability – specifically, a concern of the lack of meaningful alternatives and the existence of unfair terms in the contract.

The circuit court reasoned that the contract was substantively unconscionable because, "[a]s written, the contract will run in perpetuity with no end in sight absent one of two very specific occurrences." Those occurrences are: (1) the power plant at issue in the consulting agreement ceases to operate or (2) the contract may be terminated by the will of the...