Schuiling v. Harris

• Decision Date: 12 September 2013
• Docket Number: Record No. 121582.
• Citation: 747 S.E.2d 833,286 Va. 187
• Parties: William SCHUILING v. Samantha HARRIS.
• Court: Virginia Supreme Court

286 Va. 187

747 S.E.2d 833

William SCHUILING

v.Samantha HARRIS.

Record No. 121582.

Supreme Court of Virginia.

Sept. 12, 2013.

John D. McGavin (Michelle P. Bell, Bancroft, McGavin, Horvath & Judkins, on briefs), for appellant.

Douglas B. Wessel, for appellee.

Present: All the Justices.

Opinion by Justice WILLIAM C. MIMS.

In this appeal, we consider whether a provision in an arbitration agreement designating a specified arbitrator is an integral part of the agreement, thereby rendering the agreement unenforceable upon the unavailability of the designee.

I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW

The facts are not in dispute. In 2007, William Schuiling hired Samantha Harris as his full-time, live-in housecleaner. As a condition of her employment, Harris signed an arbitration agreement (“the Agreement”). The Agreement consisted of a one-page, pre-printed form under the heading “Brown Automotive Group” titled “Arbitration Agreement.” ¹ The Agreement provided in relevant part:

This Agreement is entered into between William Schuiling & Brown's Auto [sic] (“Employer”) and Samantha Harris (“Employee”).

Employee enters into this Agreement in consideration of Employer's promises herein contained and in consideration of Employer's employment of Employee or, in the event Employee was already employed by Employer at the time of the execution of this Agreement, Employee's continued employment by Employer.

The parties hereby agree as follows:

1. Any and all claims, disputes or controversies arising out of or related to Employee's employment by Employer shall be resolved exclusively by arbitration administered by the National Arbitration Forum under its code of procedure then in effect. The determination or award rendered therein shall be binding and conclusive upon the parties. Any modification or alteration of this Agreement shall be in writing and signed by the parties.

2. Except as provided in paragraph 3, the claims that the parties hereby agree to resolve by arbitration include any causes of action of any kind whatsoever, whether statutory or based on common law, at law or in equity, regardless of the relief or remedy sought, in tort, contract, by statute, or on any other basis, including but not limited to any and all claims, demands, rights, or causes of action arising out of Employee's employment with Employer or any employment contract....

5. If any provision of this Agreement or any part of any provision is determined to be invalid or unenforceable in whole or in part for any reason, it shall be severable from the rest of this Agreement and shall not affect any other provision of this Agreement, all of which shall remain in full force and effect and be enforceable according to their terms.

In 2011, Harris filed a 10–count complaint against Schuiling alleging multiple torts, statutory violations, and breach of contract. Relying on the Agreement, Schuiling filed a motion to enforce arbitration under Code § 8.01–581.02(A). In an accompanying memorandum, Schuiling stated that the National Arbitration Forum (“NAF”) was no longer available to administer the arbitration and requested the circuit court to appoint a substitute arbitrator under Code § 8.01–581.03.

Harris opposed the motion, arguing that the first enumerated paragraph of the Agreement exclusively designated NAF as the arbitrator. Relying on several decisions of federal and other states' courts, she contended the Agreement's exclusive designation of NAF was an integral part of the Agreement. Accordingly, she continued, the parties' agreement to arbitrate was conditioned on NAF conducting the arbitration. She concluded that its unavailability, coupled with the Agreement's failure to provide for the appointment of a substitute arbitrator, rendered the Agreement unenforceable.

The circuit court agreed with Harris and entered an order denying the motion to compel arbitration. We awarded Schuiling this interlocutory appeal pursuant to Code § 8.01–581.016(1).

II. ANALYSIS

In his first assignment of error, Schuiling asserts that the circuit court's ruling pays insufficient deference to the General Assembly's expressed public policy preference that arbitration agreements be enforced. He argues that pursuant to Code § 8.01–581.01, arbitration agreements are presumed to be valid, enforceable, and irrevocable and Code § 8.01–581.02(A) requires the court to order the parties to such agreements to proceed to arbitration. Accordingly, he concludes, the court erred when it determined that it could not appoint a substitute arbitrator under Code § 8.01–581.03.²

We have held that the statutory scheme enacted by the General Assembly favors the enforcement of arbitration agreements. TM Delmarva Power, L.L.C. v. NCP of Va., 263 Va. 116, 122, 557 S.E.2d 199, 202 (2002). However, that preference is not absolute. There is no provision in the statutory scheme prohibiting the parties from agreeing to limit the scope of its operation. See id. at 123, 557 S.E.2d at 202 (noting that both public policy “ and the plain language of” the arbitration provision required arbitration) (emphasis added).³ The dispositive question in this case, then, is whether Schuiling and Harris limited their agreement to arbitrate by making it conditional upon NAF conducting the arbitration. That question is the subject of Schuiling's second assignment of error, to which we now turn.

The circuit court determined that the Agreement exclusively designated NAF as arbitrator, that the designation was an integral part of the contract, and that NAF's unavailability rendered the whole Agreement unenforceable. Schuiling argues the Agreement's severability clause evidences the parties' intention to arbitrate their disputes irrespective of the NAF's unavailability. Conversely, Harris argues that NAF's designation cannot be severed because it is integral to the Agreement.

We review a circuit court's interpretation of a contract de novo and “ ‘have an equal opportunity to consider the words of the contract within the four corners of the instrument itself.’ ” Uniwest Constr., Inc. v. Amtech Elevator Servs., 280 Va. 428, 440, 699 S.E.2d 223, 229 (2010) (quoting Eure v. Norfolk Shipbuilding & Drydock Corp., 263 Va. 624, 631, 561 S.E.2d 663, 667 (2002)).

The question for the court is what did the parties agree to as evidenced by their contract. The guiding light in the construction of a contract is the intention of the parties as expressed by them in the words they have used, and courts are bound to say that the parties intended what the written instrument plainly declares.

Wilson v. Holyfield, 227 Va. 184, 187, 313 S.E.2d 396, 398 (1984) (quoting Meade v. Wallen, 226 Va. 465, 467, 311 S.E.2d 103, 104 (1984)). We construe the contract as a whole, giving terms their ordinary meaning unless some other meaning is apparent from the context. Virginian Ry. Co. v. Hood, 152 Va. 254, 258, 146 S.E. 284, 285 (1929). The various provisions are harmonized, giving effect to each when reasonably possible, and are construed considering the circumstances under which they were executed and the condition of the parties. Id.

A contract is either entire, meaning all its provisions are integral to the agreement of the parties, or severable. Eschner v. Eschner, 146 Va. 417, 422, 131 S.E. 800, 802 (1926); accord Budge v. Post, 544 F.Supp. 370, 381–82 (N.D.Tex.1982). Thus, whether a provision is severable or integral is the same inquiry: a provision integral to the parties' agreement cannot be severed and one the parties intended to make severable is not integral.⁴ Accordingly, the analysis is identical: “No precise or invariable rule can be laid down ... for it is a question of construction as to the intention of the parties to be discovered in each case from the language employed and the subject matter of the contract.” Eschner, 146 Va. at 422, 131 S.E. at 802 (internal quotation marks and citation omitted); accord Vega v. Chattan Assocs., 246 Va. 196, 199, 435 S.E.2d 142, 143 (1993); see also Stewart v. GGNSC–Canonsburg, L.P., 9 A.3d 215, 220 (Pa.Super.Ct.2010) (assessing the intent of the parties to determine whether provision was integral); Jones v. GGNSC Pierre LLC, 684 F.Supp.2d 1161, 1167 (D.S.D.2010) (assessing the intent of the parties to determine whether a provision was severable). In addition, the court considers “the situation of the parties and the object they had in view at the time and intended to accomplish.” O'Quinn v. Looney, 194 Va. 548, 551, 74 S.E.2d 157, 159 (1953).⁵

Relying on the language used by Schuiling and Harris in the Agreement, several factors support Schuiling's position that the parties intended NAF's designation as arbitrator to be severed if unenforceable. The first is the severability provision itself. It permits severing not only whole provisions but “any part of any provision” “determined to be invalid or unenforceable in whole or in part for any reason,” without “affect[ing] any other provision of th[e] Agreement, all of which shall remain in full force and effect and be enforceable according to their terms.”

We must give these expansive phrases their ordinary meaning. Hood, 152 Va. at 258, 146 S.E. at 285. “[F]or any reason” includes NAF's unavailability. “[A]ny part of any provision” includes the clause in the first enumerated paragraph designating NAF as arbitrator. Nothing in the severability clause or any other language in the Agreement excludes NAF's designation from the scope of the severability clause; nothing excludes NAF's unavailability as a reason for severance.

Second, as set forth in the first enumerated paragraph, the sole object of the one-page Agreement is to require arbitration of “[a]ny and all claims, disputes or controversies arising out of” Harris's employment. This arbitration requirement comprises the entire subject matter of the Agreement. The Agreement contains no unrelated provisions, such as non-compete, non-disclosure, or non-solicitation provisions, that would...