Schumacher Homes of Circleville, Inc. v. Spencer

Decision Date13 June 2016
Docket NumberNo. 14–0441,14–0441
Citation237 W.Va. 379,787 S.E.2d 650
CourtWest Virginia Supreme Court
PartiesSchumacher Homes of Circleville, Inc., a foreign corporation, Defendant Below, Petitioner v. John Spencer and Carolyn Spencer, Plaintiffs Below, Respondents

Don C.A. Parker, Esq., Nicholas P. Mooney II, Esq., Spilman Thomas & Battle PLLC, Charleston, West Virginia, Attorneys for the Petitioner.

Randall L. Trautwein, Esq., Michael L. Powell, Esq., Lamp, Bartram, Levy, Trautwein &, Perry P.L.L.C., Huntington, West Virginia, Attorneys for the Respondents.

Mychal S. Schulz, Esq., Babst, Calland, Clements &, Zomnir, P.C., Charleston, West Virginia, Attorney for Amicus Curiae, Defense Trial Counsel of West Virginia.

Mark A. Robinson, Esq., Justin D. Jack, Esq., Flaherty Sensabaugh Bonasso, PLLC, Charleston, West Virginia, Attorneys for Amicus Curiae, West Virginia Health Care Association, Inc.

Chief Justice Ketchum

:

This case is again before the Court upon a remand from the United States Supreme Court. The case began as an appeal of an order from the Circuit Court of Mason County, and involves an arbitration agreement between a home builder and a home buyer. The circuit court refused to enforce the arbitration agreement after finding it was unconscionable. In a prior opinion, we affirmed the circuit court's order.

As set forth below, we now reverse the circuit court's order. Before the circuit court and this Court, the builder argued that language in the arbitration agreement delegated questions about unconscionability to the arbitrator for resolution. The home buyer never specifically challenged the delegation language, before the circuit court or this Court. We find that the home buyer has therefore waived any right to challenge the delegation language. We remand the case to the circuit court, and direct that the parties' dispute regarding the validity, revocability, or enforceability of the arbitration agreement be referred to arbitration.

I.FACTUAL AND PROCEDURAL BACKGROUND

In June 2011, John and Carolyn Spencer (“the plaintiffs) signed a form contract with defendant Schumacher Homes of Circleville, Inc. (Schumacher), for the construction of a house in Milton, West Virginia. The contract contains an arbitration clause by which the parties agreed, in relevant part, “that any claim, dispute or cause of action, of any nature ... shall be subject to final and binding arbitration by an arbitrator[.]

Within another part of the arbitration clause is language that Schumacher contends is a “delegation provision” saying that the parties agreed to delegate, from the courts to an arbitrator, any question about the enforceability of the arbitration clause. A delegation provision is a written agreement, nestled within an arbitration clause, to vest the arbitrator with sole authority to resolve any dispute over the validity, revocability or enforceability of the arbitration clause under state contract law. The language in Schumacher's form contract comprising the delegation provision states:

The arbitrator(s) shall determine all issues regarding the arbitrability of the dispute.

Nowhere in the contract is the term “arbitrability” defined for the parties.

In July 2013, the plaintiffs brought suit against Schumacher in the circuit court claiming that there were defects in the newly-built house. In August 2013, Schumacher filed a motion asking the circuit court to dismiss the plaintiffs' suit and to compel the plaintiffs to participate in arbitration. Neither Schumacher's motion nor its legal memorandum supporting the motion made any mention of the delegation provision. The plaintiffs responded to the motion by writing that the court should find that the entire arbitration clause was unconscionable and unenforceable under state contract law.

At a hearing in February 2014, Schumacher asserted for the first time that the arbitration clause contained a delegation provision. Schumacher argued to the circuit court that, because of the delegation language, the court had no power to weigh the unconscionability of the arbitration clause. Schumacher stated that upon invocation of a delegation provision, “that's really the end of the inquiry” and [i]t's for the arbitrator to decide whether [the arbitration clause is] unconscionable.”

The plaintiffs, apparently caught off guard, did not mention the delegation language in their oral argument to the circuit court, nor did they seek additional time to respond to Schumacher's argument. Instead, the plaintiffs' argument centered solely upon the unconscionable aspects of the arbitration clause.

In an order dated March 6, 2014, the circuit court denied Schumacher's motion to dismiss and compel arbitration. The circuit court found that, as a whole, the arbitration clause was procedurally and substantively unconscionable. The circuit court's order did not address the delegation provision. Schumacher appealed the circuit court's order to this Court.

Schumacher's petition for appeal specifically raised the circuit court's failure to address the delegation provision. Schumacher asserted that the circuit court had “erred by ruling on questions of arbitrability despite the existence of a provision in the parties' Arbitration Agreement that vested the arbitrator with authority to determine all issues of arbitrability relating to the dispute.”1

The plaintiffs' response brief, however, did not challenge the delegation provision and, in fact, made no mention of Schumacher's assertion of the delegation provision. The plaintiffs' response brief recited the same arguments as the plaintiffs' brief to the circuit court and focused solely upon “whether the arbitration provision is unenforceable as being unconscionable.”2

Our opinion in Schumacher Homes of Circleville, Inc. v. Spencer

(hereafter “Schumacher I ”)3 explicated the law of arbitration agreements and delegation provisions under the Federal Arbitration Act (“the FAA”). Under the FAA, the language of a delegation provision must reflect the parties' clear and unmistakable intention to delegate issues about the validity, revocability, or enforceability of the arbitration agreement to an arbitrator.4 We then examined the language of Schumacher's purported delegation provision and found the word “arbitrability” to be ambiguous. We determined that the circuit court would have been within its rights not to enforce the delegation language because it [did] not reflect a clear and unmistakable intent by the parties to delegate state contract law questions about the validity, revocability, or enforceability of the arbitration clause to an arbitrator.”5

Schumacher then petitioned the United States Supreme Court for a writ of certiorari. Schumacher asserted that, under Supreme Court precedent, “a delegation provision contained within an arbitration agreement must be specifically enforced unless the party opposing arbitration specifically challenges the delegation provision.”6 In an order issued February 29, 2016, the Supreme Court granted the writ of certiorari, vacated Schumacher I

, and remanded the case back to this Court “for further consideration in light of [their new opinion in] DIRECTV, Inc. v. Imburgia , 577 U.S. ––––, 136 S.Ct. 463, 193 L.Ed.2d 365 (2015).”7

Upon remand, we asked the parties for supplemental briefs that were to “solely and specifically address how the Supreme Court's decision in DIRECTV, Inc. v. Imburgia

affects this Court's resolution of the issues in this case.”8 This was largely because the DIRECTV opinion was decided by the Supreme Court eight months after our opinion in Schumacher I.9

The parties' supplemental briefs did not dispute this Court's explication in Schumacher I

of the federal law underlying arbitration agreements, but focused on whether the word “arbitrability” had a clear and unmistakable meaning for the parties. Further, at oral argument, counsel for Schumacher agreed that the law stated in the syllabus points10 and within the text of Schumacher I was correct; counsel asserted that it was the application of that law that was in error.

With the Schumacher I

opinion vacated by the Supreme Court's order, we now reexamine the law of arbitration, the law of delegation provisions, and how courts and litigants should treat those contractual promises in light of the FAA, our state's contract law, and DIRECTV, Inc. v. Imburgia.11

II.STANDARD OF REVIEW

“An order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine.”12 Because the circuit court's ruling denied Schumacher's motion to dismiss, we review the circuit court's order de novo .13

III.ANALYSIS

The issue we focus upon concerns the effect of a “delegation provision” contained within an arbitration clause in a larger contract. The parties agree our discussion of the issue is controlled by the FAA.

Schumacher argues that the arbitration clause in its form contract contains language that is a delegation provision. The provision says that [t]he arbitrator(s) shall determine all issues regarding the arbitrability of the dispute.” The contract does not define “arbitrability.” Still, Schumacher argues that the trial court erred in finding the entire arbitration clause unconscionable, and should have enforced the delegation language and referred all of the parties' claims about “arbitrability” to arbitration.

The plaintiffs made no argument in the circuit court challenging the interpretation, enforceability or validity of the delegation language. By the same token, counsel for Schumacher never raised, discussed, or briefed the language until oral argument before the circuit court.14 It is clear that counsel for the plaintiffs did not have prior notice of Schumacher's intent to rely upon the delegation provision. However, once Schumacher did so, counsel for the plaintiffs should not have ignored the argument.

Before this Court, Schumacher specifically asserted that the circuit court...

To continue reading

Request your trial
20 cases
  • W. Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc.
    • United States
    • West Virginia Supreme Court
    • February 9, 2017
    ...our review is de novo .’ " (quoting Credit Acceptance , 231 W.Va. at 525, 745 S.E.2d at 563 )); Schumacher Homes of Circleville, Inc. v. Spencer , 237 W.Va. 379, 386, 787 S.E.2d 650, 657 (2016) ("Because the circuit court's ruling denied Schumacher's motion to dismiss, we review the circuit......
  • Rent-A-Center, Inc. v. Ellis
    • United States
    • West Virginia Supreme Court
    • April 30, 2019
    ...and discovery procedures rendered the entire Agreement invalid.[16 ] We examined the Rent-A-Center, West holding in Schumacher Homes of Circleville, Inc. v. Spencer ( Schumacher Homes II ),17 and held that delegation clauses will be enforced if there is a "clear and unmistakable intent" ......
  • Hampden Coal, LLC v. Varney
    • United States
    • West Virginia Supreme Court
    • February 16, 2018
    ...Rules and Mediation Procedures is a clear and unmistakable delegation provision. See Syl. Pt. 4, Schumacher Homes of Circleville, Inc. v. Spencer , 237 W.Va. 379, 787 S.E.2d 650 (2016) ("A ‘delegation provision’ is a clause, within an agreement to arbitrate, which clearly and unmistakably p......
  • Home Inspections of VA & WV, LLC v. Hardin
    • United States
    • West Virginia Supreme Court
    • November 24, 2020
    ...and must be tested separately under state contract law for validity and enforceability. Schumacher Homes of Circleville, Inc. v. Spencer , 237 W. Va. 379, 387-388, 787 S.E.2d 650, 658-659 (2016) (internal citations omitted) (" Schumacher Homes II ").When a party moves to compel arbitration,......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT