State v. Zakaib

• Decision Date: 03 December 2013
• Docket Number: No. 13–0181.,13–0181.
• Citation: 232 W.Va. 432,752 S.E.2d 586
• Court: West Virginia Supreme Court
• Parties: STATE of West Virginia ex rel. U–HAUL CO. OF WEST VIRGINIA, A West Virginia Corporation, Petitioner v. The Honorable Paul ZAKAIB, Jr., Amanda Ferrell, John Stigall, and Misty Evans, Respondents

232 W.Va. 432

752 S.E.2d 586

STATE of West Virginia ex rel. U–HAUL CO. OF WEST VIRGINIA, A West Virginia Corporation, Petitioner

v.The Honorable Paul ZAKAIB, Jr., Amanda Ferrell, John Stigall, and Misty Evans, Respondents

No. 13–0181.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 25, 2013.

Decided Nov. 26, 2013.

Concurring Opinion of Justice Workman

Dec. 3, 2013.

Syllabus by the Court

1. “Under the Federal Arbitration Act, 9 U.S.C. § 2, parties are only bound to arbitrate those issues that by clear and unmistakable writing they have agreed to arbitrate. An agreement to arbitrate will not be extended by construction or implication.” Syllabus point 10, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011), overruled on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam).

2. In the law of contracts, parties may incorporate by reference separate writings together into one agreement. However, a general reference in one writing to another document is not sufficient to incorporate that other document into a final agreement. To uphold the validity of terms in a document incorporated by reference, (1) the writing must make a clear reference to the other document so that the parties' assent to the reference is unmistakable; (2) the writing must describe the other document in such terms that its identity may be ascertained beyond doubt; and (3) it must be certain that the parties to the agreement had knowledge of and assented to the incorporated document so that the incorporation will not result in surprise or hardship.

Charles M. Love, III, Esq., Ronda L. Harvey, Esq., Floyd E. Boone, Jr., Esq., James E. Scott, Esq., Bowles Rice LLP, Charleston, West Virginia, for the Petitioner.

Anthony J. Majestro, Esq., Powell & Majestro, PLLC, Charleston, West Virginia, James C. Peterson, Esq., Aaron L. Harrah, Esq., Hill, Peterson, Carper, Bee & Deitzler, PLLC, Charleston, West Virginia, for the Respondents.

DAVIS, Justice:

This case involves the common law doctrine of contracts known as “incorporation by reference.” The parties entered into an agreement with two writings drafted by the defendant below, U–Haul of West Virginia (“U–Haul”). The first writing was titled “Rental Contract” and was signed by the three plaintiffs. The second writing, which U–Haul attempted to incorporate by reference into the signed Rental Contracts, was titled “Rental Contract Addendum” (“Addendum”) and was not signed. The U–Haul Rental Contract states that the plaintiffs agreed to the terms of the Addendum. The Addendum was not made available to U–Haul customers prior to their execution of the Rental Contract and contained, inter alia, a provision requiring that any disputes between the parties be arbitrated.

U–Haul invokes this Court's original jurisdiction seeking a writ of prohibition and asks that we set aside a circuit court order refusing to compel the three plaintiffs who signed Rental Contracts to participate in arbitration. U–Haul contends that the circuit court erred in finding that the Addendum was not incorporated by reference into the signed Rental Contracts. Because we find no error in the circuit court's conclusion, we deny the requested writ of prohibition.

I.FACTUAL AND PROCEDURAL HISTORY

Defendant U–Haul leases trucks and trailers to its customers for short-term use to transport cargo. U–Haul directly owns and operates six rental centers in West Virginia, and also relies upon a network of independent dealers throughout the State. U–Haul's moving equipment is sometimes used to transport cargo long distances, including across state lines.

On numerous occasions, the three individual plaintiffs (Amanda Ferrell, John Stigall, and Misty Evans) separately rented equipment that belonged to U–Haul. The record indicates that, before filing their lawsuit, Plaintiff Ferrell had signed a Rental Contract with U–Haul on at least four separate occasions; Plaintiff Stigall eleven times; and Plaintiff Evans twice.¹ Some of the rentals occurred at U–Haul–owned rental centers, others at independent dealer locations. The plaintiffs allege that they were quoted a particular price for a rental. However, the plaintiffs allege that on three specific occasions, U–Haul improperly and surreptitiously added either a $1.00, a $3.00, or a $5.00 “environmental charge” to the final price of their rentals.²

On August 19, 2011, the plaintiffs filed a lawsuit in the Circuit Court of Kanawha County against U–Haul asserting that the inclusion of the environmental charge constituted a breach of contract; was false advertising in violation of W. Va.Code § 32A–1–2 (1974) (Repl.Vol.2011); amounted to fraud; and violated the West Virginia Consumer Credit and Protection Act, W. Va.Code § 46A–1–101 et seq. The plaintiffs contended that U–Haul likewise fraudulently overcharged other West Virginia citizens and asked the circuit court to certify a class action.

Defendant U–Haul responded by filing a motion asking the circuit court to compel the plaintiffs to resolve their claims in arbitration. U–Haul contended that each time a customer rents equipment from U–Haul, the customer enters into an agreement comprised of two documents: (1) a one-page, signed Rental Contract and (2) an Addendum. The Addendum contains a provision stating that U–Haul and the customer agree to submit all disputes to binding arbitration. U–Haul contends the plaintiffs formed an agreement with U–Haul making them subject to this arbitration provision.

The record indicates that U–Haul customers entered into these agreements either on paper or electronically. At locations owned by independent dealers, customers would be presented with only a one-page pre-printed Rental Contract; customers were not initially shown the Addendum. Customers would sign the Rental Contract below a line that essentially said, “I acknowledge that I have received and agree to the terms and conditions of this Rental Contract and the Rental Contract Addendum.” ³

At locations owned by U–Haul, interactive electronic terminals were used to show terms of the Rental Contract to customers; the terminals did not display any terms of the Addendum. The terms of the Rental Contract would appear on successive screen pages, and before the customer could view a subsequent screen's rental terms, the customer would have to click a button marked “Accept” on the terminal at the bottom of the screen. None of the screens mentioned the arbitration clause at issue. After several screens had been displayed, the customer would reach a final screen that said, “By clicking Accept, I agree to the terms and conditions of this Rental Contract and Rental Contract Addendum.” The customer would then have to sign their name on the screen with a stylus and click another button marked “Accept.” If the customer clicked “Accept,” a paper copy of the Rental Contract would then be printed by a U–Haul employee.

U–Haul asserts that it is its “unvarying and routine business practice” that every employee or independent dealer require every customer to agree to the terms of the Rental Contract before any rental equipment is provided. The plaintiffs, however, contend that while they may have signed the Rental Contract (on paper or on an electronic terminal), they did not agree to the terms of the Addendum, in part, because of the way U–Haul gives the Addendum to customers.

The Addendum is a multicolor pamphlet made of rectangular cardstock, but folded into five sections and shaped like an envelope or narrow folder. One of the apparent outside panels of the pamphlet has the title, “RENTAL CONTRACT ADDENDUM,” with the next line saying, “DOCUMENT HOLDER.” Below that are a few lines in smaller text stating, “Additional Terms and Conditions for EQUIPMENT Rental, Place Rental Contract documents in this folder & keep available throughout your move.” Following this text is a colored block with giant text stating, “RETURNING EQUIPMENT.” The remainder of the outside of the pamphlet contains detailed instructions for returning rental equipment. The other easily visible outside panels of the Addendum have advertisements for additional services offered by U–Haul, such as storage rooms. The Addendum must be opened to reveal the arbitration clause contained inside.

The plaintiffs contend that, after a Rental Contract is signed by a customer, the paper copy of the Rental Contract (whether a pre-printed form or generated using the electronic terminals) is folded in thirds like a letter by a U–Haul employee or independent dealer. The Rental Contract is then slipped inside of the folder-shaped Addendum and both are handed to the customer either before or at the same time keys are provided for the rental equipment.

The circuit court received evidence and affidavits from the parties and conducted a hearing. U–Haul argued that the doctrine of incorporation by reference allowed it to enforce the arbitration provision. The plaintiffs, however, argued that the arbitration provision in the Addendum was not mutually agreed to by the parties, since nothing in the language of the Rental Contract, or in the way that U–Haul gives the Addendum to its customers, was sufficient to inform the plaintiffs of the existence of the arbitration clause inside of the Addendum.

On March 27, 2012, the circuit court entered an order denying U–Haul's motion to compel arbitration finding that the parties never mutually agreed to arbitrate their disputes. The circuit court determined that the arbitration provision was a material term of the contract which was presented to the plaintiffs only after the contract had been signed. The circuit court specifically found that the arbitration provision had never previously been communicated to the plaintiffs. Because the plaintiffs never accepted the terms of the arbitration provision, the circuit court concluded that no contract to arbitrate was ever formed between the...