Credit Acceptance Corp. v. Robert J. and Billye S. Front, etc. , 231 W. Va. 518 ( 2013 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2013 Term
FILED
June 19, 2013
released at 3:00 p.m.
RORY L. PERRY II, CLERK
No. 11-1646 SUPREME COURT OF APPEALS
OF WEST VIRGINIA
CREDIT ACCEPTANCE CORP.,
Defendant Below, Petitioner
V.
ROBERT J. FRONT AND BILLYE S. FRONT,
Plaintiffs Below, Respondents
Appeal from the Circuit Court of Raleigh County
Honorable Harry L. Kirkpatrick, III, Judge
Civil Action Nos. 11-C-289(K) and 11-C-290(K)
REVERSED AND REMANDED
AND
No. 12-0545
CREDIT ACCEPTANCE CORP.,
Defendant Below, Petitioner
V.
OCIE SHREWSBURY,
Plaintiff Below, Respondent
Appeal from the Circuit Court of Raleigh County
Honorable John A. Hutchison, Judge
Civil Action No. 11-C-391-H
REVERSED AND REMANDED
Submitted: April 10, 2013
Filed: June 19, 2013
Don C. A. Parker Ralph C. Young
Bruce M. Jacobs Christopher B. Frost
Nicholas P. Mooney Hamilton Burgess Young & Pollard
Spilman Thomas & Battle, PLLC Fayetteville, West Virginia
Charleston, West Virginia Attorneys for the Respondents,
Attorneys for the Petitioner Robert J. Front & Billye S. Front
Ralph C. Young
Christopher B. Frost
Steven R. Broadwater, Jr.
Hamilton Burgess Young & Pollard
Fayetteville, West Virginia
Attorneys for the Respondent,
Ocie Shrewsbury
JUSTICE DAVIS delivered the Opinion of the Court.
JUSTICE KETCHUM concurs and reserves the right to file a concurring opinion.
SYLLABUS BY THE COURT
1. An order denying a motion to compel arbitration is an interlocutory
ruling which is subject to immediate appeal under the collateral order doctrine.
2. “‘A contract term is unenforceable if it is both procedurally and
substantively unconscionable. However, both need not be present to the same degree.
Courts should apply a ‘sliding scale’ in making this determination: the more substantively
oppressive the contract term, the less evidence of procedural unconscionability is required
to come to the conclusion that the clause is unenforceable, and vice versa.’ Syllabus Point
20, Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011)[, overruled
in part 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).]” Syllabus point 9, Brown v. Genesis
Healthcare Corp., 229 W. Va. 382, 729 S.E.2d 217 (2012).
3. Where an arbitration agreement names a forum for arbitration that is
unavailable or has failed for some reason, a court may appoint a substitute forum pursuant
to section 5 of the Federal Arbitration Act, 9 U.S.C. § 5 (1947) (2006 ed.), only if the choice
of forum is an ancillary logistical concern. Where the choice of forum is an integral part of
i
the agreement to arbitrate, the failure of the chosen forum will render the arbitration
agreement unenforceable.
4. “A state statute, rule, or common-law doctrine, which targets arbitration
provisions for disfavored treatment and which is not usually applied to other types of contract
provisions, stands as an obstacle to the accomplishment and execution of the purposes and
objectives of the Federal Arbitration Act, 9 U.S.C. § 2, and is preempted.” Syllabus point
8, Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250
(2011), overruled in part 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).
ii
Davis, Justice:
Two appeals have been consolidated for decision in this matter. In these
consolidated appeals, Credit Acceptance Corp., petitioner (hereinafter “Credit Acceptance”),
appeals orders issued by the Circuit Court of Raleigh County in each case that denied Credit
Acceptance’s motion to compel arbitration.1 Credit Acceptance contends that, in both of
these cases, the circuit courts erred by concluding that the arbitration agreements were
unconscionable based upon the unavailability of arbitration forums named therein, and
because the debtors in the agreements waived their respective rights to a jury trial. Because
we find that one of the arbitration forums named in the agreements remains available to
arbitrate the parties’ disputes, and because an arbitration agreement is not rendered
unenforceable solely because a party thereto waives his or her right to a jury trial, we reverse
both of these cases and remand for entry of orders compelling arbitration.
I.
FACTUAL AND PROCEDURAL HISTORY
The cases underlying these consolidated appeals all involve the purchase of an
automobile. We relate the particular facts of each case separately below.
1
The motions each sought to have the case dismissed or, in the alternative,
stayed pending arbitration.
1
A. Front Plaintiffs
On August 17, 2007, Robert and Billye Front (hereinafter collectively “the
Fronts”) purchased a 2003 Chevrolet Cavalier automobile from Finish Line Pre-Owned Auto
Sales (hereinafter “Finish Line”). To purchase this vehicle, the Fronts executed a retail
installment and security agreement with Finish Line. Finish Line assigned all its rights, title,
and interest in the contract and the vehicle to Credit Acceptance in exchange for Credit
Acceptance financing the purchase.
Thereafter, on April 17, 2008, the Fronts purchased a 2005 Ford Focus vehicle
from Prestige Ford Lincoln-Mercury, Inc. (hereinafter “Prestige”). As with their first
automobile purchase, the Fronts executed a retail installment contract with Prestige. Prestige
subsequently assigned all its rights, title, and interest in the contract to Credit Acceptance.
Both of the retail installment contracts executed by the Fronts in connection
with their vehicle purchases contained arbitration clauses. The clauses were nearly identical2
and stated, in part:
The Federal Arbitration Act governs this Arbitration Clause.
You and we understand and agree that You and we choose
arbitration instead of litigation to resolve Disputes. You and we
2
Differences in the two contracts are noted below.
2
voluntarily and knowingly waive any right to a jury trial. . . .[3]
....
You or we may elect to arbitrate under the rules and procedures
of either the National Arbitration Forum or the American
Arbitration Association; however in the event of a conflict
between these rules and procedures and the provisions of this
Arbitration Clause, You and we agree that this Arbitration
Clause governs for that specific conflict. You may obtain the
rules and procedures, information on fees and costs (including
waiver of the fees), and other materials, and may file a claim by
contacting the organization of your choice. . . .
....
It is expressly agreed that this Contract evidences a transaction
in interstate commerce.[4] The Arbitration Clause is governed by
the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (“FAA”) and
not by any state arbitration law.
(Footnotes added). After the Fronts executed the aforementioned contracts, one of the
selected arbitration forums, the National Arbitration Forum (hereinafter “NAF”), was sued
by the State of Minnesota. As a result of this suit, the NAF entered into a consent decree
forbidding it from conducting consumer arbitration. See CompuCredit Corp. v. Greenwood,
___ U.S. ___, ___ n.2, 132 S. Ct. 665, 677 n.2, 181 L. Ed. 2d. 586 (2012) (“In 2009, after
the Attorney General of Minnesota filed an action alleging that NAF had engaged in
numerous violations of consumer-protection laws, NAF entered into a consent decree barring
3
This language was not underlined in the contract for the purchase of the 2003
Chevrolet Cavalier.
4
This sentence did not appear in the contract for the purchase of the 2003
Chevrolet Cavalier.
3
it from handling consumer arbitrations.”). Shortly thereafter, “[i]n July 2009, AAA issued
a moratorium on arbitrating cases concerning consumer debt collections if those cases were
brought by the company and the consumer did not consent to the arbitration.” Montgomery
v. Applied Bank, 848 F. Supp. 2d 609, 613 (S.D.W. Va. 2012). Thus, one of the contractually
designated arbitrators, NAF, was no longer available to arbitrate any dispute that arose under
the Credit Acceptance/Front contracts, and the other designated arbitrator, AAA, was
available only on a limited basis.
The Fronts commenced two civil actions against Credit Acceptance in the
Circuit Court of Raleigh County in May 2011. The claims related to communications the
Fronts allegedly received from Credit Acceptance after their debt under the two retail
installment contracts was in arrears. Each complaint set forth four causes of action: (1)
violations of the West Virginia Consumer Credit and Protection Act (hereinafter “the
WVCCPA”); (2) negligence; (3) intentional infliction of emotional distress; and (4) invasion
of privacy. In each case, Credit Acceptance filed a motion to compel arbitration and dismiss,
or, in the alternative, to stay the action pending arbitration. The circuit court consolidated
the two cases and ultimately denied Credit Acceptance’s motions. The circuit court found
that the contracts were not procedurally unconscionable at the time of their formation, but
the subsequent unavailability of one of the selected arbitration forums materially changed the
contracts and rendered them procedurally unconscionable. The court additionally found that
4
the unavailability of one of the selected forums rendered the contracts substantively
unconscionable. Finally, the circuit court found that the arbitration agreements violated the
Fronts’ fundamental right under the West Virginia Constitution to use the court system to
seek justice and violated the WVCCPA, which the circuit court interpreted as prohibiting a
consumer from waiving the right to a jury trial. The court designated the order as a “final
order.” It is from this order that Credit Acceptance appeals.
B. Shrewsbury Plaintiff
Ocie Shrewsbury and Virgil Shrewsbury5 (hereinafter collectively “the
Shrewsburies”) purchased a 2000 Ford Expedition from Greg Lilly Auto Sales, Inc.
(hereinafter “Lilly Auto”), on July 11, 2010. In connection with this purchase, the
Shrewsburies executed a retail installment contract and security agreement with Lilly Auto.
Lilly Auto then assigned all its rights, title, and interest in the contract and the vehicle to
Credit Acceptance, who financed the purchase. The retail installment contract executed by
the Shrewsburies in connection with their vehicle purchase contained an arbitration clause
using the same language as that quoted above from the 2005 Front contract. Notwithstanding
the fact that the NAF was no longer available to arbitrate any dispute that arose under the
contract, and the AAA was available only on a limited basis,6 the contract nevertheless
5
Virgil Shrewsbury is not a party to this action.
6
For an explanation of the unavailability of the NAF and the AAA, see supra
(continued...)
5
designated those two organizations as arbitrators of any disputes in the same manner as those
organizations had been designated in the Credit Acceptance/Front contracts.
On May 17, 2011, Ocie Shrewsbury (hereinafter “Ms. Shrewsbury”) filed a
civil action against Credit Acceptance in the Circuit Court of Raleigh County alleging: (1)
violations of the WVCCPA; (2) negligence; (3) intentional infliction of emotional distress;
and (4) invasion of privacy related to communications she allegedly received from Credit
Acceptance after her debt under the retail installment contract was in arrears. Credit
Acceptance then filed a motion to compel arbitration or, in the alternative, to stay the action
pending arbitration. The circuit court ultimately denied the motion finding the arbitration
agreement was not enforceable. Similar to the circuit court’s order in the Front case, the
circuit court found that the contract was not procedurally unconscionable insofar as “it
provided an adequate means for the Plaintiff to opt out.” However, the circuit court further
observed that the unavailability of the selected arbitration forums materially changed the
contract such that there was no meeting of the minds. Therefore, the circuit court concluded
that the contract was unenforceable “as it exists today.” The circuit court additionally found
that the unavailability of the selected forums materially altered the terms of the contract and
rendered the contract substantively unconscionable. Finally, the circuit court found the
6
(...continued)
Section I.A. titled “Front Plaintiffs.”
6
arbitration agreement was unenforceable in that it essentially eliminated Ms. Shrewsbury’s
constitutional right to file suit. It is from this order that Credit Acceptance appeals.
II.
STANDARD OF REVIEW
Before we reiterate the proper standard for our review of these consolidated
cases, we first consider whether these appeals are appropriate. These two appeals are before
this Court from circuit court orders that denied motions to dismiss and to compel arbitration.
Thus, these consolidated cases seek this Court’s review of interlocutory orders.
“[O]rdinarily the denial of a motion to dismiss is an
interlocutory order and, therefore, is not immediately
appealable. See, e.g., Syl. pt. 2, State ex rel. Arrow Concrete
Co. v. Hill, 194 W. Va. 239, 460 S.E.2d 54 (1995) (“Ordinarily
the denial of a motion for failure to state a claim upon which
relief can be granted made pursuant to West Virginia Rules of
Civil Procedure 12(b)(6) is interlocutory and is, therefore, not
immediately appealable.”). See also Hutchison v. City of
Huntington, 198 W. Va. 139, 147, 479 S.E.2d 649, 657 (1996)
(indicating that this Court rarely addresses a circuit court’s
denial of a motion to dismiss since such an order is
interlocutory).
Ewing v. Board of Educ. of Cnty. of Summers, 202 W. Va. 228, 235, 503 S.E.2d 541, 548
(1998). Typically, interlocutory orders are not subject to this Court’s appellate jurisdiction.
See Coleman v. Sopher, 194 W. Va. 90, 94, 459 S.E.2d 367, 371 (1995) (“The usual
prerequisite for our appellate jurisdiction is a final judgment, final in respect that it ends the
case.”). This “rule of finality” is not an absolute rule. Rather, there is a “narrow category
7
of orders that are subject to permissible interlocutory appeal.” Robinson v. Pack, 223 W. Va.
828, 831, 679 S.E.2d 660, 663 (2009). The Robinson Court explained that,
[o]bjections to allowing an appeal from an interlocutory
order are typically rooted in the need for finality. The
provisions of West Virginia Code § 58-5-1 (2005) establish that
appeals may be taken in civil actions from “a final judgment of
any circuit court or from an order of any circuit court
constituting a final judgment.” Id. Justice Cleckley elucidated
in James M.B. v. Carolyn M., 193 W. Va. 289, 456 S.E.2d 16
(1995), that “[t]his rule, commonly referred to as the ‘rule of
finality,’ is designed to prohibit ‘piecemeal appellate review of
trial court decisions which do not terminate the litigation[.]’”
193 W. Va. at 292, 456 S.E.2d at 19 (quoting U.S. v. Hollywood
Motor Car Co., 458 U.S. 263, 265, 102 S. Ct. 3081, 73 L. Ed. 2d
754 (1982)). Exceptions to the rule of finality include
“interlocutory orders which are made appealable by statute or by
the West Virginia Rules of Civil Procedure, or . . . [which] fall
within a jurisprudential exception” such as the “collateral order”
doctrine. James M.B., 193 W. Va. at 292–93, 456 S.E.2d at
19–20; accord Adkins v. Capehart, 202 W. Va. 460, 463, 504
S.E.2d 923, 926 (1998) (recognizing prohibition matters,
certified questions, Rule 54(b) judgment orders, and “collateral
order” doctrine as exceptions to rule of finality).
223 W. Va. at 832, 679 S.E.2d at 664 (footnote omitted). See also C & O Motors, Inc. v.
West Virginia Paving, Inc., 223 W. Va. 469, 475, 677 S.E.2d 905, 911 (2009) (“In addition
to the ‘ministerial’ acts exception, this Court has recognized a limited number of other
exceptions to the rule of finality. Our cases have pointed out that we may address specific
issues decided by an interlocutory order under the collateral order doctrine or ‘by writs of
prohibition, certified questions, or by judgments rendered under Rule 54(b) of the West
Virginia Rules of Civil Procedure.’” (quoting James M.B., 193 W. Va. at 292 n.3, 456 S.E.2d
8
at 19 n.3)). The exception referred to as the “collateral order” doctrine, which was
established by the United States Supreme Court in Cohen v. Beneficial Industrial Loan Corp.,
337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 1528 (1949), may be applied to allow appeal of an
interlocutory order when three factors are met: “An interlocutory order would be subject to
appeal under [the collateral order] doctrine if it (1) conclusively determines the disputed
controversy, (2) resolves an important issue completely separate from the merits of the
action, and (3) is effectively unreviewable on appeal from a final judgment.” Durm v.
Heck’s, Inc., 184 W. Va. 562, 566 n.2, 401 S.E.2d 908, 912 n.2 (1991) (internal quotations
and citation omitted). See also Robinson v. Pack, 223 W. Va. 828, 679 S.E.2d 660 (applying
three-part collateral order doctrine to circuit court’s denial of summary judgment on issue of
qualified immunity and finding order immediately appealable).
Applying the collateral order doctrine, the Robinson Court ultimately held that
“[a] circuit court’s denial of summary judgment that is predicated on qualified immunity is
an interlocutory ruling which is subject to immediate appeal under the ‘collateral order’
doctrine.” Syl. pt. 2, id. While Robinson involved a denial of immunity in the form of an
order denying summary judgment, this Court has applied Robinson to a qualified immunity
decision made in the form of a denial of a motion to dismiss. See Jarvis v. West Virginia
State Police, 227 W. Va. 472, 711 S.E.2d 542 (2010).
9
In concluding that the order denying the motion to dismiss was immediately
appealable under the collateral order doctrine, the Jarvis Court adopted the rationale
expressed in Robinson. In this respect, the Robinson Court explained that,
[w]ith regard to the first factor of [the Cohen collateral
order doctrine test], which requires that the ruling at issue must
be conclusive, “the [trial] court’s denial of summary judgment
[on the issue of qualified immunity] finally and conclusively
determines the defendant’s claim of right not to stand trial on
the plaintiff’s allegations.” [Mitchell v. Forsyth, 472 U.S. 511,
527, 105 S. Ct. 2806, 2816, 86 L. Ed. 2d 411 (1985)]. Because
a ruling denying the availability of immunity fully resolves the
issue of a litigant’s obligation to participate in the litigation, the
first factor of Cohen is easily met. As to the second factor[,]
which focuses on whether the immunity ruling resolves
significant issues separate from the merits, there is little question
that the “claim of immunity is conceptually distinct from the
merits of the plaintiff’s claim that his [or her] rights have been
violated.” Id. at 527–28, 105 S. Ct. [at 2816, 86 L. Ed. 2d 411].
The final factor of the Cohen test requires us to consider
whether a qualified immunity ruling is “effectively
unreviewable” at the appeal stage. Postponing review of a
ruling denying immunity to the post-trial stage is fruitless, as the
United States Supreme Court reasoned in Mitchell, because the
underlying objective in any immunity determination (absolute or
qualified) is immunity from suit. 472 U.S. at 526-27, 105 S. Ct.
2806; see also Gray–Hopkins v. Prince George’s County, Md.,
309 F.3d 224, 229 (4th Cir. 2002) (“Because qualified immunity
is an immunity from having to litigate, as contrasted with an
immunity from liability, it is effectively lost if a case is
erroneously permitted to go to trial.”) (omitting internal
citation); Jenkins v. Medford, 119 F.3d 1156, 1159 (4th Cir.
1997) (observing that denial of qualified immunity defense
“subjects the [government] official to the burdens of pretrial
matters” and opining that “some of the rights inherent in a
qualified immunity defense are [consequently] lost”).
Traditional appellate review of a qualified immunity ruling
10
cannot achieve the intended goal of an immunity ruling: “the
right not to be subject to the burden of trial.” Hutchison [v. City
of Huntington, 198 W. Va. 139, 148, 479 S.E.2d 649, 658
(1996)]. As a result, the third factor of Cohen is easily met.
Robinson, 223 W. Va. at 832-33, 679 S.E.2d at 664-65 (concluding that “[a]pplication of the
Cohen test demonstrates that a circuit court’s denial of summary judgment that is predicated
on qualified immunity is an interlocutory ruling which is subject to immediate appeal under
the ‘collateral order’ doctrine.”).
Following the rationale expressed by the Robinson Court, we will analyze an
order compelling arbitration under the collateral order doctrine to ascertain if such an order
is among that limited class of interlocutory orders that is immediately appealable.7
7
In McGraw v. American Tobacco Co., this Court addressed the issue of
whether an order granting a motion to compel arbitration was immediately appealable and
held:
A circuit court order compelling arbitration is not subject
to direct appellate review prior to the dismissal of the circuit
court action unless the order compelling arbitration otherwise
complies with the requirements of West Virginia Code § 58–5–1
(1998) and Rule 54(b) of the West Virginia Rules of Civil
Procedure. A party seeking this Court’s review of a circuit
court order compelling arbitration prior to entry of a final order
which complies with the requirements of West Virginia Code
§ 58-5-1 (1998) and Rule 54(b) of the West Virginia Rules of
Civil Procedure must do so in an original jurisdiction
proceeding seeking a writ of prohibition.
Syl. pt. 1, McGraw, 224 W. Va. 211, 681 S.E.2d 96 (2009) (first emphasis added). Thus,
(continued...)
11
As to the first factor in the collateral order test, that the ruling at issue
“conclusively determines the disputed controversy,” Durm, 184 W. Va. at 566 n.2, 401
S.E.2d at 912 n.2, we find that a circuit court’s ruling that refuses to compel arbitration is
conclusive as to the disputed controversy of whether the parties are required to arbitrate. By
7
(...continued)
under McGraw, an interlocutory order compelling arbitration is not subject to direct appeal
unless certain conditions are met. Insofar as the McGraw opinion addressed an order
compelling arbitration, as opposed to an order refusing to compel arbitration, it is not
applicable to the instant proceeding. The practice of denying appeals of orders compelling
arbitration absent a final order while allowing direct appeals of orders refusing to compel
arbitration is consistent with how many other courts have treated appeals of arbitration
decisions under the FAA. See McGraw, 224 W. Va. at 220, 681 S.E.2d at 105 (“Section 16
of the FAA governs appellate review of motions to compel arbitration, permitting it in some
circumstances, while denying it in other[s]. 9 U.S.C. § 16 (1990).”). Accord Guidotti v.
Legal Helpers Debt Resolution, L.L.C., No. 12-1170, 2013 WL 2302324, at *12 (3d Cir. May
28, 2013) (“We have jurisdiction to review a district court’s denial of a motion to compel
arbitration under 9 U.S.C. § 16[(a)](1)(B).” (emphasis added)); Adams v. Monumental Gen.
Cas. Co., 541 F.3d 1276, 1277 (11th Cir. 2008) (“We have no jurisdiction over this appeal
because the district court compelled arbitration. 9 U.S.C. § 16(b)(2). Section 16 governs
the appealability of interlocutory orders regarding arbitration, ConArt, Inc. v. Hellmuth,
Obata + Kassabaum, Inc., 504 F.3d 1208, 1210 (11th Cir.2007), and subsection (b)(2) states
that ‘an appeal may not be taken from an interlocutory order . . . directing arbitration to
proceed,’ 9 U.S.C. § 16(b)(2).”); Augustea Impb Et Salvataggi v. Mitsubishi Corp., 126 F.3d
95, 99 (2d Cir. 1997) (“Section 16(a)(1)(C)’s language provides that a party may appeal from
a district court order denying a motion to compel arbitration pursuant to 9 U.S.C. § 206,
while under section 16(b)(2) and (3) a party cannot appeal an order compelling arbitration.”).
See also David D. Siegel, Practice Commentary to 9 U.S.C.A. § 16 (West 1990)
(“Subdivision (a) of § 16 enumerates the situations in which an immediate appeal from an
arbitrability determination is allowed. It applies for the most part to determinations against
arbitration. Subdivision (b) enumerates the situations in which an appeal is not to be allowed,
and all of them are decisions in favor of arbitration. In trumpeting this pro-arbitration view,
however, note that subdivision (b) addresses only an ‘interlocutory’ order. Hence a
pro-arbitration decision that amounts to a final disposition in its particular judicial context
remains appealable . . . .”).
12
denying such a motion, the circuit court thereby concludes that a case will proceed to trial.
Such a ruling forecloses arbitration of the underlying claims asserted and, therefore,
conclusively resolves the issue of arbitration.
The second factor of the collateral order test asks whether the order “resolves
an important issue completely separate from the merits of the action,” Durm, 184 W. Va. at
566 n.2, 401 S.E.2d at 912 n.2. We find there to be little doubt that the issue of arbitration
is completely separate from the merits of the underlying claims in a given action.
Furthermore, resolution of the arbitration question is important in that it resolves the
foundational question of the manner in which the parties will resolve their dispute, either by
arbitration or through the courts.
The final consideration in the collateral order test is whether the order “is
effectively unreviewable on appeal from a final judgment.” Durm, 184 W. Va. at 566 n.2,
401 S.E.2d at 912 n.2. We find that an order refusing to compel arbitration is effectively
unreviewable on appeal. The result of such an order is litigation. The purpose of arbitration
is to avoid litigation in favor of a quicker and less costly method of dispute resolution. See
Raymond James Fin. Servs., Inc. v. Bishop, 596 F.3d 183, 190 (4th Cir. 2010) (commenting
that “‘the purpose of having arbitration at all [is] the quick resolution of disputes and the
avoidance of the expense and delay associated with litigation’” (quoting Apex Plumbing
13
Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir.1998))); Grayiel v.
Appalachian Energy Partners 2001-D, LLP, 230 W. Va. 91, __, 736 S.E.2d 91, 101 (2012)
(identifying one purpose of arbitration as “providing a suitable alternative forum for
plaintiff’s claims”); Board of Ed. of Berkeley County v. W. Harley Miller, Inc., 160 W. Va.
473, 479, 236 S.E.2d 439, 443 (1977) (describing the purpose of arbitration as “just, speedy,
economical conflict resolution”). Thus, a party who is required to wait until the conclusion
of litigation to appeal the denial of arbitration has already borne the financial and temporal
cost of such litigation and has, therefore, effectively lost, irreparably, the right to arbitration.
Having found that an order denying a motion to compel arbitration fulfils the
requirements of the collateral order doctrine, we now hold that an order denying a motion to
compel arbitration is an interlocutory ruling which is subject to immediate appeal under the
collateral order doctrine. Applying this holding to the instant case, we find the appeals are
proper.
When an appeal from an order denying a motion dismiss is properly before this
Court, our review is de novo. See, e.g., Syl. pt. 4, Ewing, 202 W. Va. 228, 503 S.E.2d 541
(“When a party, as part of an appeal from a final judgment, assigns as error a circuit court’s
denial of a motion to dismiss, the circuit court’s disposition of the motion to dismiss will be
14
reviewed de novo.”). Accordingly, we proceed to conduct our de novo review of the issues
raised in these consolidated appeals.
III.
DISCUSSION
Credit Acceptance asserts that two errors warrant reversing the circuit courts’
orders denying its motions to compel arbitration in these cases. First, Credit Acceptance
argues that the circuit courts erred in finding the contracts to be unconscionable based upon
the unavailability of arbitration forums named in the agreements. Second, Credit Acceptance
argues that the circuit courts erroneously concluded that the arbitration agreements were
unenforceable because the debtors therein waived their rights to a jury trial. We address
these issues separately below.
A. Unconscionability
On the topic of contractual unconscionability, this Court previously has held
that
“[a] contract term is unenforceable if it is both
procedurally and substantively unconscionable. However, both
need not be present to the same degree. Courts should apply a
‘sliding scale’ in making this determination: the more
substantively oppressive the contract term, the less evidence of
procedural unconscionability is required to come to the
conclusion that the clause is unenforceable, and vice versa.”
Syllabus Point 20, Brown v. Genesis Healthcare Corp., 228
15
W. Va. 646, 724 S.E.2d 250 (2011)[, overruled in part 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).]”
Syl. pt. 9, Brown v. Genesis Healthcare Corp., 729 S.E.2d 217, 221 (2012).8
The circuit court orders in each of the two consolidated appeals concluded that
the arbitration contracts were both procedurally and substantively unconscionable based upon
the unavailability of one or both of the two named arbitration forums. Thus, we will address
both theories of unconscionability.
1. Procedural Unconscionability. The circuit court’s order in the Front case,
Appeal No. 11-1646, found the contract to be procedurally unconscionable as follows:
The court is apprised of the fact that the original contract
is not procedurally unconscionable, in as much [sic] as it
provided an adequate means for the plaintiffs to opt out of it;
was adequately brought to the attention of the plaintiffs; and,
provided two separate arbitration forums. However, the fact
that one of the specific arbitration forums has been eliminated,
8
The author of this opinion did not participate in the decision in Brown ex rel.
Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011), overruled in
part on other grounds by Marmet Health Care Center, Inc. v. Brown, ___ U.S. ___, 132
S. Ct. 1201, 182 L. Ed. 2d 42 (2012). Separate from the majority, the author of this opinion
independently questions the need for establishing both substantive and procedural
unconscionability to find a contractual term is unenforceable. However, insofar as this
opinion ultimately reaches the conclusion that the contractual terms at issue were not
unconscionable, and the parties have not challenged this Court’s prior holding, the
consolidated cases sub judice do not present the proper opportunity for such an analysis.
16
materially changing the terms of the contract, causes the court
to determine that there was no meeting of the minds to create the
contract as it exists today.
The circuit court’s order in the Shrewsbury case, Appeal No. 12-0545,
concluded that
the contract in this matter is not procedurally unconscionable in
that it provided an adequate means for the Plaintiff to opt out.
Further, the arbitration agreement was clearly brought to the
attention of the Plaintiff in the contract, and provided for
arbitration by two separate forums, NAF and AAA. However,
neither of the specified forums currently accepts creditor
arbitration agreements requests. Because the specific arbitration
forums have been eliminated, there has been a material change
in the terms of the contract. The Court has therefore determined
that there was no meeting of the minds to create the contract as
it exists today, and the arbitration agreement is unenforceable.
Notably, both of the orders quoted above concluded that the contracts at issue
were not procedurally unconscionable at the time of their execution, but were rendered
procedurally unconscionable by subsequent events. In Syllabus point 10 of Brown v. Genesis
Healthcare Corp., 229 W. Va. 382, 729 S.E.2d 217 (2012) (hereinafter referred to as “Brown
II”), this Court explained that
“[p]rocedural unconscionability is concerned with
inequities, improprieties, or unfairness in the bargaining process
and formation of the contract. Procedural unconscionability
involves a variety of inadequacies that results in the lack of a
real and voluntary meeting of the minds of the parties,
considering all the circumstances surrounding the transaction.
17
These inadequacies include, but are not limited to, the age,
literacy, or lack of sophistication of a party; hidden or unduly
complex contract terms; the adhesive nature of the contract; and
the manner and setting in which the contract was formed,
including whether each party had a reasonable opportunity to
understand the terms of the contract.” Syllabus Point 17, Brown
v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250
(2011)[, overruled in part 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).]”
(Emphasis added). As the Brown II Court observed, procedural unconscionability relates to
unconscionability at the time a contract is formed “in the bargaining process and formation
of the contract.” Id. Because this Court’s review must focus on the contract at the time it
was agreed upon, the circuit courts’ conclusions that the contracts could be rendered
procedurally unconscionable by subsequent events is erroneous.9
2. Substantive Unconscionability. The circuit court’s order in the Front case,
Appeal No. 11-1646, stated, with respect to substantive unconscionability, that
[i]n examining the matter of substantive
unconscionability, the court finds that the elimination of an
arbitration forum is a substantive change in the terms of the
contract. Public policy favors a plaintiff having his day in court
9
Ms. Shrewsbury argues that the NAF consent decree and AAA moratorium
were already in place when her contract was executed naming the foregoing organizations
as arbitrators. Thus, she contends that her contract was procedurally unconscionable at the
time of its formation. We disagree. Ms. Shrewsbury fails to allege that Credit Acceptance
named these forums in the contract for the purpose of achieving an unfair advantage, nor
does she direct this Court to any evidence in the appendix record that would support such a
theory. Therefore, we reject this argument.
18
should the terms of a contract be materially altered after the
execution of said contract.
The circuit court’s order in the Shrewsbury case, Appeal No. 12-0545, likewise
stated that,
[i]n examining substantive unconscionability, the court
finds that the elimination of the arbitration forums is a material
change in the terms of the contract. Public policy favors a
plaintiff having his day in court should the terms of a contract be
materially altered after the execution of the contract. Further,
this court is reluctant to uphold an arbitration agreement which
essentially eliminates a party’s constitutional right to file suit,
especially when the agreement no longer exists in its original
form. Although the right to assert one’s claim in the court
system may be subject to a legally enforceable waiver, courts
indulge every reasonable presumption against waiver of a
fundamental constitutional right and will not presume
acquiescence in the loss of such fundamental right. . . . For
these reasons, the Court finds that the arbitration agreement in
this case is unenforceable.
(Internal citations and quotations omitted).
This Court has clarified that,
“[s]ubstantive unconscionability involves unfairness in
the contract itself and whether a contract term is one-sided and
will have an overly harsh effect on the disadvantaged party. The
factors to be weighed in assessing substantive unconscionability
vary with the content of the agreement. Generally, courts should
consider the commercial reasonableness of the contract terms,
the purpose and effect of the terms, the allocation of the risks
between the parties, and public policy concerns.” Syllabus Point
19, Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724
19
S.E.2d 250 (2011)[, overruled in part 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).]”
Syl. pt. 12, Brown II, 229 W. Va. 382, 729 S.E.2d 217. The sole basis for the conclusions
of the circuit courts that the Front and Shrewsbury contracts were substantively
unconscionable was the unavailability of one or both of the arbitration forums designated in
the agreement to govern arbitration between the parties to the respective contracts. Insofar
as the determination of substantive unconscionability instructs a reviewing court to examine
the general fairness of the contract through factors such as “the commercial reasonableness
of the contract terms, the purpose and effect of the terms, the allocation of the risks between
the parties, and public policy concerns,” we find this analysis simply is not applicable to the
determination of whether the unavailability of a selected arbitration forum renders a contract
unenforceable. There is nothing inherently unreasonable about a contract term in which the
parties choose to select one or more forums to conduct arbitration of disputes that may arise
between said parties. The subsequent unavailability of a selected forum does not
automatically render the contract unconscionable. Rather, courts have developed other tests,
which will be discussed below, for determining whether the unavailability of a chosen
arbitration forum renders a contract unenforceable. Accordingly, we find that both of the
20
circuit courts erred in finding the Front and Shrewsbury contracts to be substantively
unconscionable based upon the unavailability of a chosen arbitration forum.10
B. Forum Availability
The essence of the unconscionability arguments made to this Court in these
consolidated appeals is more properly framed as challenging whether the unavailability of
a chosen arbitration forum renders an arbitration agreement unenforceable. We begin our
analysis with the FAA, insofar as the arbitration agreements at issue all stated that they are
governed thereby. Section 5 of the FAA requires a court to designate an arbitrator under
certain circumstances:
If in the agreement provision be made for a method of
naming or appointing an arbitrator or arbitrators or an umpire,
such method shall be followed; but if no method be provided
therein, or if a method be provided and any party thereto shall
fail to avail himself of such method, or if for any other reason
there shall be a lapse in the naming of an arbitrator or arbitrators
or umpire, or in filling a vacancy, then upon the application of
either party to the controversy the court shall designate and
10
Ms. Shrewsbury additionally argues that her contract was substantively
unconscionable because the arbitration clause was buried on the back of a densely-printed
form. However, this argument was neither raised to or addressed by the circuit court.
Accordingly, the issue is not properly before this Court for our review. See Syl. pt. 2, Trent
v. Cook, 198 W. Va. 601, 482 S.E.2d 218 (1996) (“‘[T]he Supreme Court of Appeals is
limited in its authority to resolve assignments of nonjurisdictional errors to a consideration
of those matters passed upon by the court below and fairly arising upon the portions of the
record designated for appellate review.’ Syl. Pt. 6, in part, Parker v. Knowlton Const. Co.,
Inc., 158 W. Va. 314, 210 S.E.2d 918 (1975).”), overruled on other grounds by Gibson v.
Northfield Ins. Co., 219 W. Va. 40, 631 S.E.2d 598 (2005).
21
appoint an arbitrator or arbitrators or umpire, as the case may
require, who shall act under the said agreement with the same
force and effect as if he or they had been specifically named
therein; and unless otherwise provided in the agreement the
arbitration shall be by a single arbitrator.
9 U.S.C. § 5. Federal courts have concluded that section 5 of the FAA may be applied when
a chosen arbitrator is unavailable. See Khan v. Dell Inc., 669 F.3d 350, 354 (3d Cir. 2012)
(“[S]ection 5 of the FAA . . . provides a mechanism for substituting an arbitrator when the
designated arbitrator is unavailable.”); Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217,
1222 (11th Cir. 2000) (“Where the chosen forum is unavailable, however, or has failed for
some reason, § 5 applies and a substitute arbitrator may be named.”); Astra Footwear Indus.
v. Harwyn Int’l, Inc., 442 F. Supp. 907, 910 (S.D.N.Y.), aff’d, 578 F.2d 1366 (2d Cir.1978)
(“The Court finds that 9 U.S.C. § 5 was drafted to provide a solution to the problem caused
when the arbitrator selected by the parties cannot or will not perform.”).
However, section 5 of the FAA does not warrant the automatic appointment
of a substitute arbitrator when the chosen arbitrator is unavailable. A method for applying
section 5 of the FAA under such circumstances was established by the Eleventh Circuit Court
of Appeals in Brown v. ITT Consumer Financial Corp., 211 F.3d 1217. More recently, the
Brown method was summarized by the Third Circuit Court of Appeals as follows:
In determining the applicability of Section 5 of the FAA when
an arbitrator is unavailable, courts have focused on whether the
designation of the arbitrator was integral to the arbitration
provision or was merely an ancillary consideration. . . . [O]nly
22
if the choice of forum is an integral part of the agreement to
arbitrate, rather than an ancillary logistical concern, will the
failure of the chosen forum preclude arbitration. . . . In other
words, a court will decline to appoint a substitute arbitrator, as
provided in the FAA, only if the parties’ choice of forum is so
central to the arbitration agreement that the unavailability of that
arbitrator brings the agreement to an end. . . . In this light, the
parties must have unambiguously expressed their intent not to
arbitrate their disputes in the event that the designated arbitral
forum is unavailable.
Kahn, 669 F.3d at 354 (quotations and citations omitted). This formulation of the application
of section 5 of the FAA is the majority rule.11 See Ranzy v. Tijerina, 393 Fed. Appx. 174,
176 (5th Cir. 2010) (“Section 5 [of the FAA] does not, however, permit a district court to
circumvent the parties’ designation of an exclusive arbitration forum when the choice of that
11
See Diversicare Leasing Corp. v. Nowlin, No. 11-CV-1037, 2011 WL
5827208, at *5 (W.D. Ark. Nov. 18, 2011) (“The majority of courts who have addressed
whether a substitute can be appointed pursuant to Section 5 [when the specifically named
forum in an arbitration agreement cannot hear the parties’ claims] have utilized the approach
set out in Brown v. ITT Consumer Financial Corp., 211 F.3d 1217 (11th Cir.2000)). See also
Rivera v. American Gen. Fin. Servs., Inc., 259 P.3d 803, 812 (N.M. 2011) (observing
“[m]any jurisdictions have . . . concluded that Brown’s “integral” versus “ancillary logistical
concern” test is a proper way to determine whether a court may appoint a substitute
arbitration provider.”).
To the contrary, at least one federal court has found that section 5 of the FAA
never applies to appoint a substitute for a named arbitration forum that is unavailable because
the unavailability of a selected forum does not fall within the meaning of the term “lapse”
as used in section 5. See In re Salomon Inc. Shareholders’ Derivative Litig. 91 Civ. 5500
(RRP), 68 F.3d 554, 560 (2d Cir. 1995) (concluding that “[s]ection 5 applies when there is
‘a lapse in the naming of an arbitrator . . . or in filling a vacancy.’ 9 U.S.C. § 5 (emphasis
added). We believe that the ‘lapse’ referred to in § 5 means ‘a lapse in time in the naming
of the’ arbitrator or in the filling of a vacancy on a panel of arbitrators, Pacific Reins. Mgt.
Corp.[ v. Ohio Reins. Corp], 814 F.2d[ 1324,] 1327 [(9th Cir.1987)], or some other
mechanical breakdown in the arbitrator selection process[.]”).
23
forum is an integral part of the agreement to arbitrate, rather than an ancillary logistical
concern.” (quotations and citations omitted)); Reddam v. KPMG LLP, 457 F.3d 1054,
1059–60 (9th Cir. 2006) (“When a court asks whether a choice of forum is integral, it asks
whether the whole arbitration agreement becomes unenforceable if the chosen arbitrator
cannot or will not act.”), overruled on other grounds as recognized in Atlantic Nat’l Trust
LLC v. Mt. Hawley Ins. Co., 621 F.3d 931, 940 (9th Cir. 2010); Brown v. ITT Consumer Fin.
Corp., 211 F.3d at 1222 (“Where the chosen forum is unavailable . . . or has failed for some
reason, § 5 applies and a substitute arbitrator may be named. . . . Only if the choice of forum
is an integral part of the agreement to arbitrate, rather than an ancillary logistical concern will
the failure of the chosen forum preclude arbitration.” (quotations and citations omitted));
Green v. U.S. Cash Advance Illinois, LLC, No. 12-C-8079, 2013 WL 317046, at *3 (N.D. Ill.
Jan. 25, 2013) (“A substitute arbitrator may not be appointed, however, if the provision
naming the arbitrator was an integral part of the agreement. Thus, the court must decide
before applying § 5 whether the chosen arbitration forum is integral to the agreement or
merely an ancillary logistical concern.” (citations and quotations omitted)); Klima v.
Evangelical Lutheran Good Samaritan Soc’y, No. 10-CV-1390-JAR-JPO, 2011 WL
5412216, at *3 (D. Kan. Nov. 8, 2011) (following majority based on finding “the approach
taken by the Fifth, Ninth, and Eleventh Circuits consistent with both the purpose behind the
FAA and general principles of contract law because it treats arbitration agreements like
contracts and looks to the parties’ intent”); Adler v. Dell Inc., No. 08-CV-13170, 2009 WL
24
4580739, at *2 (E.D. Mich. Dec. 3, 2009) (“As a general rule, when the arbitrator named in
the arbitration agreement cannot or will not arbitrate the dispute, the court does not void the
arbitration agreement. Instead, it appoints a different arbitrator, as provided in [§ 5 of] the
Federal Arbitration Act[.] . . . The exception to this rule occurs when it is clear that the failed
term is not an ancillary logistical concern but rather is as important a consideration as the
agreement to arbitrate itself.” (internal quotations, citations, and footnote omitted));
McGuire, Cornwell & Blakey v. Grider, 771 F. Supp. 319, 320 (D. Colo. 1991) (“[A]s a
general rule, where the arbitrator named in the arbitration agreement cannot or will not
arbitrate the dispute, a court does not void the agreement but instead appoints a different
arbitrator. . . . There is an exception to this rule. Where it is clear that the failed term is not
an ancillary logistical concern but rather is as important a consideration as the agreement to
arbitrate itself, a court will not sever the failed term from the rest of the agreement and the
entire arbitration provision will fail.” (internal quotations and citations omitted)); Carr v.
Gateway, Inc., 241 Ill. 2d 15, 26, 944 N.E.2d 327, 333 (2011) (“[W]e agree with those
federal courts that have held section 5 of the Act may be applied to name a substitute
arbitrator where the parties’ designated arbitral forum fails, unless the designation of the
arbitral forum is integral to the parties’ agreement to arbitrate.”); Rivera v. American Gen.
Fin. Servs., Inc., 259 P.3d 803, 812 (N.M. 2011) (“We agree with the jurisdictions that have
focused on the parties’ intent, as expressed in the contract, to determine whether § 5 of the
FAA permits a court to substitute a different arbitration provider. The ‘integral’ or ‘ancillary
25
logistical concern’ test articulated by the Eleventh Circuit in Brown, 211 F.3d at 1222, is
consistent with New Mexico’s general principles of contract law in requiring courts to give
effect to the intent of the parties.” (second internal quotation and citation omitted)).
The majority rule is founded on the “liberal federal policy in favor of
arbitration articulated in the FAA.” Kahn, 669 F.3d at 356 (internal quotations omitted). The
rationale for the rule has been explained as follows:
When the reference to arbitration rules or an arbitration
forum is merely “an ancillary or logistical concern,” the
application of Section 5 to appoint a different arbitrator does not
do violence to the intentions of the parties. By contrast, when
the choice of arbitration forum was integral to the agreement,
such that the parties would not have agreed upon arbitration
absent the selected forum, application of Section 5 to appoint a
substitute arbitrator is more problematical.
Jones v. GGNSC Pierre LLC, 684 F. Supp. 2d 1161, 1166 (D.S.D. 2010).
We are persuaded by the foregoing authority, and, therefore, we now expressly
hold that where an arbitration agreement names a forum for arbitration that is unavailable or
has failed for some reason, a court may appoint a substitute forum pursuant to section 5 of
the Federal Arbitration Act, 9 U.S.C. § 5 (1947) (2006 ed.), only if the choice of forum is an
ancillary logistical concern. Where the choice of forum is an integral part of the agreement
to arbitrate, the failure of the chosen forum will render the arbitration agreement
unenforceable.
26
Turning to the facts of the instant consolidated cases, the three arbitration
agreements involved in this appeal contained the following provision: “You or we may elect
to arbitrate under the rules and procedures of either the National Arbitration Forum or the
American Arbitration Association.” As we explained in the “Factual and Procedural
History” section of this opinion, Section I.A., supra, as a result of a suit filed by the State of
Minnesota, the NAF entered into a consent decree forbidding it from conducting consumer
arbitration. See CompuCredit Corp. v. Greenwood, ___ U.S. at ___ n.2, 132 S. Ct. at 677
n.2, 181 L. Ed. 2d. 586 (“In 2009, after the Attorney General of Minnesota filed an action
alleging that NAF had engaged in numerous violations of consumer-protection laws, NAF
entered into a consent decree barring it from handling consumer arbitrations.”). Thus, the
NAF is unavailable to arbitrate the claims asserted by the Fronts and Ms. Shrewsbury against
Credit Acceptance.
Shortly after the NAF was barred from handling consumer arbitrations, the
“AAA issued a moratorium on arbitrating cases concerning consumer debt collections if
those cases were brought by the company and the consumer did not consent to the
arbitration.” Montgomery v. Applied Bank, 848 F. Supp. 2d at 613 (emphasis added). It is
significant that the moratorium issued by the AAA applies only to consumer debt collection
cases brought by the company. Thus, as Credit Acceptance has asserted, because the claims
against it were brought by consumers, the Fronts and Ms. Shrewsbury, the AAA remains an
27
available forum to arbitrate those claims. Indeed, during oral argument of this case, counsel
for the Fronts and Ms. Shrewsbury rightfully conceded that the AAA remained available to
arbitrate his clients’ disputes. See Montgomery, 848 F. Supp. 2d at 614 (“AAA indicates that
it will continue to administer all demands for arbitration filed by consumers against
businesses, and all other types of consumer arbitrations.” (quotations and citation omitted)).
See also American Arbitration Association, “Notice on Consumer Debt Collection
A r b i t r a t i o n s , ” a v a i l a b l e a t ,
http://www.adr.org/cs/groups/governmentandconsumer/documents/document/dgdf/mdey/
~edisp/adrstg_012244.pdf (“[T]he AAA’s previously announced moratorium on debt
collection arbitrations remains in effect. . . . Matters included in this moratorium are:
consumer debt collection programs or bulk filings and individual case filings in which the
company is the filing party and the consumer has not agreed to arbitrate at the time of the
dispute, and the case involves a credit card bill, a telecom bill or a consumer finance matter.
The AAA will continue to administer all demands for arbitration filed by consumers against
businesses as well as all other types of consumer arbitrations.” (emphasis added)).
Because one of the arbitration forums named in the arbitration agreements
remains available to arbitrate the disputes underlying this appeal, it is not necessary for this
Court to conduct an analysis as to whether the forum selection was merely an ancillary
logistical concern, or was instead an integral part of the agreement to arbitrate. Due to the
28
availability of a chosen forum, the circuit courts erred in denying Credit Acceptance’s
motions to compel arbitration. See, e.g., Montgomery v. Applied Bank, 848 F. Supp. 2d 609,
613 (finding arbitration agreement not unenforceable on grounds of unavailability of forum,
in part, because AAA remained available); Conroy v. Citibank, N.A., No. CV 10–04930
SVW (AJWx), 2011 WL 10503532, at *6 (C.D. Cal. July 22, 2011) (rejecting argument that
arbitration agreement unenforceable due to potential unavailability of forum where AAA
remained available); Smith v. ComputerTraining.com Inc., 772 F. Supp. 2d 850, 862 (E.D.
Mich. 2011) (“This case is not covered by the moratorium. It does not involve a consumer
debt collection, telecom bill, or consumer finance matter. Instead, this case constitutes a
claim which would be filed by consumers against a business, which AAA’s website explicitly
says that it will hear. . . . Plaintiffs can demand arbitration before AAA.” (citation omitted));
In re Pfeiffer, Bankr. No. 11–13274, 2011 WL 4005504, at *8 (Bkrtcy. E.D. Pa. Sept. 8,
2011) (finding FAA section 5 inapplicable due to availability of AAA).
C. Right to a Jury Trial
In the Front case, Appeal No. 11-1646, the circuit court found that the Fronts
could not contractually waive their rights under the WVCCPA, stating:
West Virginia Code § 46A-1-107 prohibits West Virginia
consumers from waiving any rights under the West Virginia
Consumer Credit and Protection Act (the “Act”’). The Act
states:
Except as otherwise provided in this chapter, a
29
consumer may not waive or agree to forgo rights
or benefits under this chapter or under article
two-a, chapter forty-six of this code.
The court is of the opinion that a consumer’s . . . rights afforded
under the Act include the right to a jury trial. This right cannot
be waived by an agreement, especially an agreement which no
longer exists in its original form.
Similarly, in the Shrewsbury case, Appeal No. 12-0545, the circuit court stated:
[T]his Court is reluctant to uphold an arbitration agreement
which essentially eliminates a party’s constitutional right to file
suit . . . . Although the right to assert one’s claim in the court
system may be subject to a legally enforceable waiver, “[c]ourts
indulge every reasonable presumption against waiver of a
fundamental constitutional right and will not presume
acquiescence in the loss of such fundamental right.” Syllabus
Point 2, State ex rel. May v. Boles, 149 W. Va. 155, 139 S.E.2d
177 (1964).
Credit Acceptance argues that the foregoing rulings were erroneous. We agree.
In Syllabus point 1 of Brown II, this Court held:
Under the Federal Arbitration Act, 9 U.S.C. § 2, a written
provision to settle by arbitration a controversy arising out of a
contract that evidences a transaction affecting interstate
commerce is valid, irrevocable, and enforceable, unless the
provision is found to be invalid, revocable or unenforceable
upon a ground that exists at law or in equity for the revocation
of any contract.
229 W. Va. 382, 729 S.E.2d 217 (citation omitted). Thus, insofar as an arbitration
agreement, by its very nature, requires a party to surrender his or her right to litigate, it may
30
not be invalidated solely upon that ground. See American Gen. Life & Acc. Ins. Co. v. Wood,
429 F.3d 83, 91 n.6 (4th Cir. 2005) (“To the extent that Wood argues that any waiver of his
constitutional right to access to state courts or trial by jury must be knowing and voluntary,
we have already stated that ‘the loss of the right to a jury trial is a necessary and fairly
obvious consequence of an agreement to arbitrate.’ Snowden v. CheckPoint Check Cashing,
290 F.3d 631, 638 (4th Cir. 2002) (internal quotations and citations omitted).”); Lake James
Cmty. Volunteer Fire Dep’t, Inc. v. Burke Cnty., N.C., 149 F.3d 277, 280 (4th Cir. 1998)
(commenting “simply because a contract includes the waiver of a constitutional right does
not render the contract per se unenforceable” and including the right to a jury trial in a list
of waivers of rights that have been upheld). See also Harrington v. Atlantic Sounding Co.,
Inc., 602 F.3d 113, 126 (2d Cir. 2010) (concluding “Harrington’s argument that the
Agreement was substantively unconscionable because it takes away his right to a trial by jury
fails because courts may not rely on the uniqueness of an agreement to arbitrate, which
necessarily waives jury trial, as a basis for a state-law holding that enforcement would be
unconscionable. . . . It is well-settled that waivers of jury trial are fully enforceable under the
FAA,” and collecting cases (quotations and citations omitted)).
Furthermore,
[a] state statute, rule, or common-law doctrine, which
targets arbitration provisions for disfavored treatment and which
is not usually applied to other types of contract provisions,
stands as an obstacle to the accomplishment and execution of
31
the purposes and objectives of the Federal Arbitration Act, 9
U.S.C. § 2, and is preempted.
Syl. pt. 8, Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d
250, 261 (2011), overruled in part on other grounds by Marmet Health Care Ctr., Inc. v.
Brown, ___ U.S. ___, 132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012) (per curiam). Insofar as the
circuit courts’ rulings single out arbitration for disfavored treatment, such rulings must be
rejected. Accordingly, we find that both circuit courts erred in their conclusions that the
arbitration agreements were invalid as waiving the right to a jury trial.
IV.
CONCLUSION
For the reasons expressed in the body of this opinion, in Appeal No. 11-1646,
we reverse the October 20th, 2011, order of the Circuit Court of Raleigh County, in which
the Fronts were plaintiffs, and remand the cases consolidated by that court for entry of an
order compelling arbitration.
We likewise, for the same reasons, in Appeal No. 12-0545, reverse the March
28, 2012, order of the Circuit Court of Raleigh County, in which Ms. Shrewsbury was the
plaintiff, and remand for entry of an order compelling arbitration.
Appeal No. 11-1646, Reversed and Remanded.
Appeal No. 12-0545, Reversed and Remanded.
32