Mandatory arbitration for consumer disputes in West Virginia has long been a litigation morass. For years, West Virginia courts have simply invalidated mandatory arbitration provisions in consumer contracts by simply stating that those provisions were against public policy.

All of that seemed to change in February 2012, when the United States Supreme Court issued its decision in Marmet Healthcare Center Inc. v. Brown. In that case, the United States Supreme Court found that the West Virginia State Court of Appeals erred in declaring that the Federal Arbitration Act did not preempt state’s public policy against pre-dispute arbitration agreements as applied to claims of personal injury or wrongful death against nursing homes. The highest court went on to state that both state and federal courts must enforce the Federal Arbitration Act with respect to all arbitration agreements covered by that statute. The court further stated that the Federal Arbitration Act legislates that a written contract evidencing a transaction involving commerce to settle by arbitration shall be valid, irrevocable and enforceable, unless there are grounds that exist at law or in equity for revocation of the entire contract. The court went on to hold that the statute’s text includes no exception for personal injury or wrongful death claims, and it requires courts to enforce the agreement by the parties to arbitrate. The court further indicated that the Federal Arbitration Act inflects an emphatic federal policy in favor of arbitration for dispute resolution.

Many thought that the language contained in the United States Supreme Court decision set forth groundwork for the arbitration of disputes where West Virginia consumers were involved as a party. However, the West Virginia Supreme Court of Appeal has not completely embraced the federal court’s fondness for arbitration.

On November 15, 2012, the West Virginia Supreme Court of Appeals filed its opinion in Dan Ryan Builders Inc. v. Nelson, which was a certified question from the United States District Court of Appeals, for the Fourth Circuit. In its opinion, the West Virginia Court spent a great deal of time discussing adequate consideration in the contract, as well as the theory of unconscionability voiding the entire contract. In issuing three new syllabus points, the court held as follows, “The formation of a contract with multiple clauses only requires consideration for the entire contract, and not for each individual clause. So long as the overall contract is supported by sufficient consideration, there is no requirement of consideration for each promise within the contract, or of mutuality of obligation, in order for the contract to be formed.”

This syllabus point indicates that so long as there is adequate consideration in the entire contract, there need not be consideration for each individual contract clause. This holding seems to indicate that the court’s view towards arbitration might be softening.

However, the court went on to hold that “A court in its equity powers is charged with the discretion to determine, on a case-by-case basis, whether a contract provision is so harsh and overly unfair that it should not be enforced under the doctrine of unconscionability.” In its final new syllabus point, the court went on to state, “In assessing whether a contract provision is substantively unconscionable, a court may consider whether the provision lacks mutuality of obligation. If a provision creates a disparity in the rights of the contracting parties, such that it is one-sided and unreasonably unfavorable to one party, than the court may find the provision is substantively unconscionable.”

In answering the certified question from the Fourth Circuit, the West Virginia Supreme Court of Appeals has indicated that it is up to the circuit courts of the state to look at each individual contract to determine if the contents of the contract are unconscionable based upon the one-sidedness of the language.

On that same day, West Virginia’s highest court also filed its opinion in Grayiel v. Appalachian Energy Partners 2001-D, LLP that reversed the Putnam County Circuit Court’s order dismissing the complaint and ordering the parties to arbitrate, per the terms contained in the 20 contracts signed by the parties over a two-year period. The high court ordered the circuit court to review the contracts and pertinent surrounding facts to determine if the contractual terms were unconscionable under guidelines set forth in prior opinions (finding that the arbitration provisions were invalid).

What It Means to You

Where does it leave those who draft, utilize, or try to enforce contracts that contain an arbitration provision? Recognizing the courts new directive for the circuit courts throughout the state to review each document to determine unconscionability, those involved in the formation and enforcement of contracts must take care to have their contracts be written in a manner that would not provide an opportunity for the local circuit court judges to find that the contract was unfair or one-sided, thereby permitting the court to find that the terms contained therein were unconscionable.

Needless to say, this will be a continuing, evolving area of law in West Virginia that will, most likely, go through a number of changes, metamorphosis, and gyrations, as the federal and state courts hammer this issue out until there is solid ground for those in consumer contracts to stand.