Rent-A-Center, Inc. v. Ellis

• Decision Date: 30 April 2019
• Docket Number: No. 17-0644,17-0644
• Citation: 241 W.Va. 660,827 S.E.2d 605
• Parties: RENT-A-CENTER, INC. and Rent-A-Center, East, Inc., Defendants Below, Petitioners v. Anita ELLIS, Plaintiff Below, Respondent
• Court: West Virginia Supreme Court

241 W.Va. 660

827 S.E.2d 605

RENT-A-CENTER, INC. and Rent-A-Center, East, Inc., Defendants Below, Petitioners

v.Anita ELLIS, Plaintiff Below, Respondent

No. 17-0644

Supreme Court of Appeals of West Virginia.

Submitted: January 29, 2019

Filed: April 30, 2019

Richard Wallace, Esq., LITTLER MENDELSON, PC, Charleston, West Virginia, Edward F. Berbarie, Esq., Pro Hac Vice, Robert F. Friedman, Esq., Pro Hac Vice, LITTLER MENDELSON, PC, Dallas, Texas, Counsel for the Petitioners

Jerome J. McFadden, Esq., Law Offices of Jerome McFadden, PLLC, Princeton, West Virginia, James D. McQueen, Esq., McQueen Davis, PLLC, Huntington, West Virginia, Counsel for the Respondent

WALKER, CHIEF JUSTICE:

After Respondent Anita Ellis was terminated from employment, she filed workers’ compensation discrimination claims against Petitioners Rent-A-Center, Inc. and Rent-A-Center East, Inc. Relying on the arbitration agreement that Respondent signed at the time she was hired, Petitioners moved to compel arbitration. Respondent challenged the arbitration agreement’s delegation clause, which required that any challenge to the interpretation, applicability, enforceability or formation of the agreement be resolved by the arbitrator and not any court, on the grounds that it was ambiguous, unconscionable and in violation of West Virginia Code § 23-2-7 (2017). The circuit court found the delegation clause unconscionable and refused to enforce the arbitration agreement. On appeal, Petitioners contend that the delegation clause should have been enforced and the matter sent to arbitration. Because the delegation clause was neither unconscionable nor unenforceable, we reverse the circuit court and remand this case for an order compelling arbitration.

I. FACTUAL AND PROCEDURAL BACKGROUND

When Respondent was hired by Petitioners in March of 2011 as an assistant manager, she signed a "Mutual Agreement to Arbitrate Claims" (arbitration agreement). The agreement states that it is governed by the Federal Arbitration Act (FAA), that it applies mutually to both parties, and that the mutual obligation to arbitrate differences "[p]rovide[s] consideration for each other." The arbitration agreement includes a "Claims Covered by the Agreement" section that states:

The Company and I mutually consent to the resolution by arbitration of all claims or controversies ("claims"), past, present or future, including without limitation, claims arising out of my application for employment, assignment/employment, and/or the termination of my assignment/employment

....

... The claims covered by this Agreement include, but are not limited to: ... tort or statutory claims for discrimination (including, but not limited to, ... workers’ compensation); ... and claims for violation of any federal, state or other governmental law, statute, regulation, or ordinance ....

Under the "Arbitration Procedures" section, the agreement includes the following delegation clause:

The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including, but not limited to, any claim that all or part of this Agreement is void or voidable.

Just above the Respondent’s signature line on the agreement, the following appears in bold, capitalized letters:

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT; THAT I UNDERSTAND ITS TERMS; THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME RELATING TO THE SUBJECTS COVERED IN THE AGREEMENT ARE CONTAINED IN IT; AND THAT I HAVE ENTERED INTO THE AGREEMENT NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT ITSELF. I UNDERSTAND THAT BY SIGNING THIS AGREEMENT THE COMPANY AND I ARE GIVING UP OUR RIGHTS TO A JURY TRIAL AND THAT PURSUANT TO THE TERMS OF THIS AGREEMENT, I AM AGREEING TO ARBITRATE CLAIMS COVERED BY THIS AGREEMENT.

I FURTHER ACKNOWLEDGE THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH MY PRIVATE COUNSEL AND HAVE AVAILED MYSELF OF THAT OPPORTUNITY TO THE EXTENT THAT I WISH TO DO SO.

On April 8, 2014, Respondent injured her right shoulder while moving a refrigerator at work. She filed a workers’ compensation claim and received temporary total disability (TTD) benefits for the period April 23, 2014, through May 15, 2014. By letter dated November 28, 2014, Petitioners terminated Respondent from employment effective November 11, 2014. The stated reason for termination was Respondent’s absences from work.

On October 8, 2015, Respondent sought to re-open her workers’ compensation claim. She was awarded TTD benefits for the period of May 19, 2014, through December 17, 2014. Respondent then filed a complaint in the Circuit Court of Mercer County in which she alleged that Petitioners unlawfully terminated her while she was off work due to a compensable injury and for which she received or was eligible to receive TTD benefits in violation of West Virginia Code §§ 23-5A-1 and - 3(a) (2017).

Petitioners filed a motion to dismiss or stay the case and compel arbitration arguing that Respondent’s claim is covered under the arbitration agreement. Petitioners further argued that, to the extent Respondent challenges the enforceability or applicability of the arbitration agreement, the agreement’s delegation clause requires that those challenges be decided by the arbitrator and not the circuit court.

Respondent opposed Petitioners’ motion to compel on three grounds. First, Respondent argued that the delegation clause was ambiguous and failed to reflect an unmistakable intent by the parties to delegate to the arbitrator the determination of gateway issues of arbitrability. Second, Respondent asserted that the delegation clause was unconscionable under West Virginia common law contract principles. Third, Respondent alleged that the delegation clause is invalid because it violates West Virginia Code § 23-2-7, which provides that "[n]o employer or employee shall exempt himself from the burden or waive the benefits of [the workers compensation statute] by any contract, agreement, rule or regulation, and any such contract, agreement, rule or regulation shall be pro tanto void."

In an order entered June 22, 2017, the circuit court denied Petitioners’ motion to compel. The court determined that the arbitration agreement was both procedurally and substantively unconscionable and that there was no mutual agreement to arbitrate. In finding that the arbitration agreement was procedurally unconscionable, the circuit court placed significance on the fact that the arbitration provision was a non-negotiable term in an adhesion contract, and the Respondent was not permitted to opt out of or alter the provision. The circuit court also noted that the Respondent did not have the same level of sophistication or understanding about the arbitration clause as the Petitioners’ attorneys who drafted the language, and found that she likely had no meaningful opportunity to seek counsel.

In finding substantive unconscionability, the circuit court determined that the agreement substantially impaired a plaintiff’s right to pursue remedies for their losses such as a class action suit, which was expressly waived in the agreement, and that it would deprive the Respondent of a statutory remedy that exists to benefit and protect workers that have the claims set forth in West Virginia Code § 23-5A-3. The circuit court also concluded that there was a lack of a real and voluntary meeting of the minds, there was an overall imbalance and one-sidedness to the agreement, and there was no real choice or bargaining on the part of the Respondent, as her only alternative to signing the agreement was not taking the job. Further, it found that the consideration for the agreement "that both parties agree to arbitrate," was an "illusory promise" and was therefore inadequate. This appeal followed.

II. STANDARD OF REVIEW

Petitioners appeal the circuit court’s denial of its motion to compel arbitration and to dismiss. This Court has held previously 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."¹ We have also held that "[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 ."² Further, "we apply a de novo standard of review to [a] circuit court’s interpretation of [a] contract."³ Applying this standard, we proceed to determine whether the circuit court committed error in refusing to refer the underlying matter to arbitration.

III. ANALYSIS

The parties assert various assignments and cross-assignments of error, all of which pertain to one central issue—whether the delegation clause in the arbitration agreement between the parties should have been enforced. Petitioners assert that the circuit court erred in denying their motion to compel arbitration because the delegation clause clearly assigns the arbitrator "the exclusive authority to resolve any dispute relating to the ... applicability, enforceability, or formation of ... the arbitration agreement." Petitioners contend that in Rent-A-Center, West, Inc. v. Jackson ,⁴ the United States Supreme Court enforced the identical delegation clause and found that it clearly delegated the gateway issues of arbitrability to the arbitrator. Thus, Petitioners contend the FAA mandates that an arbitrator and not the circuit court should have determined whether the arbitration agreement is unenforceable.⁵

Reiterating the arguments she made below, Respondent asserts that the delegation clause is (1) ambiguous and fails to reflect an unmistakable intent to delegate to the arbitrator the determination of gateway issues of arbitrability; (2) unconscionable under West Virginia common law contract principles; and (3) invalid because it violates West Virginia Code § 23-2-7. Before...