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Employee Resource Group, LLC v. Harless

Supreme Court of West Virginia

April 13, 2017

Employee Resource Group, LLC, and Charles Rice, Petitioners
v.
Connie Harless, Respondent

         Boone County No. 15-C-43

          MEMORANDUM DECISION

         This appeal requires us to determine the enforceability of an arbitration agreement between an employer and its former employee. Petitioners Employee Resource Group, LLC ("ERG"), and Charles Rice, by counsel, Bradley K. Shafer, appeal the order of the Circuit Court of Boone County, West Virginia, denying their motion to enforce the parties' arbitration agreement. Petitioners argue the circuit court erred by finding the agreement procedurally and substantively unconscionable. Respondent Connie Harless, by counsel, Matthew M. Hatfield and Paul Framption, Jr., filed a summary response in support of the circuit court's order.

         Upon our review of the parties' arguments, the appendix record, and the pertinent authorities, we conclude the circuit court erred in refusing to enforce the arbitration agreement. We therefore reverse the circuit court's April 29, 2016, order and remand this matter for referral to arbitration. This case presents no substantial question of law and satisfies the "limited circumstances" requirement of Rule 21(d) of the West Virginia Rules of Appellate Procedure for disposition by memorandum decision.

         I. Factual and Procedural Background

         Ms. Harless was employed by ERG from 1984 to 2014; she worked as the general manager at the Wendy's restaurant in Danville, West Virginia. Ms. Harless alleged the following: she received reports that one of ERG's employees, Ronald Chafin, was sexually harassing female employees. In response to those reports, Ms. Harless advised Mr. Chafin that his actions were improper. Further, Ms. Harless reported the harassment to her immediate supervisor, Petitioner Charles Rice. Shortly thereafter, ERG terminated Ms. Harless' employment in January 2014.

         In February 2015, Ms. Harless filed a lawsuit against Petitioners and alleged they "engaged in reprisals or other discriminatory actions" against her in violation of the West Virginia Human Rights Act. See W.Va. Code § 5-11-9(7)(c) (2013). Petitioners filed an Answer to the Complaint and a Motion to Enforce Arbitration Agreement. Petitioners argued that Ms. Harless could not seek redress in circuit court for her claims against them, as she was a party to an arbitration agreement that required her to arbitrate any and all claims or disputes she had arising from her employment.

         The agreement at issue is titled "Dispute Resolution Program." The agreement provides the "steps" that should be taken to resolve work-related problems: Step 1: Communication (an "open-door policy" encourages employees to talk directly to their immediate supervisor, and if not satisfied, to take concerns to the next higher level of management, or call the toll free "Hotline"); Step 2: Executive Review (of supervisor's decision); Step 3: Mediation (in mediation, the "Company will contact the American Arbitration Association (AAA) or similar organization specializing in dispute resolution); and Step 4: Arbitration. With regard to these steps, the agreement provides:

While we encourage you to use all of the steps in the Program in the order outlined, we realize that in some cases it may not be appropriate to use the preliminary steps. Accordingly, if your claim involves a legal claim that is subject to arbitration hereunder, you may proceed directly to Step 3, Mediation, without first using Step 1, Communication or Step 2, Executive Review. The Company may skip Steps 1 and 2 if a legal claim is involved.

         The agreement discusses the arbitration procedures[1] and lists the legal claims subject to arbitration, [2] as well as those claims not subject to arbitration.[3] The agreement states that the provisions "are severable and, should any provision be held unenforceable, all others will remain valid and binding. No provision of the Program document will be held unenforceable if such provision can be reasonably interpreted in a manner that results in such provision being enforceable."[4]

         The last page of the agreement, in bold print, states that

[w]hile this Program constitutes a binding promise between you and the Company to arbitrate all claims in dispute described in this Program Booklet, this Program is not and shall not be construed to create any contract of employment, expressed or implied. Nor does this Program in any way alter the "at-will" status of any employee. This Program will prevent you from filing a lawsuit in Court for individual relief for a legal claim subject to arbitration.

         Ms. Harless signed an acknowledgement of this agreement on March 21, 2005; the paragraph preceding her signature provided: "I hereby acknowledge that I received a copy of the Company's Dispute Resolution Program Booklet effective April 1, 2005[.] . . . I understand and agree that the Dispute Resolution Program shall apply to me."

         In their motion to compel arbitration, Petitioners contended this Dispute Resolution Program constituted a contract between the parties to resolve their legal claims or disputes covered by its terms through binding arbitration. They relied upon language in the agreement which directed that binding arbitration is the "sole and exclusive final remedy for resolving any such claim or dispute." Ms. Harless filed a response to this motion and maintained the agreement was unenforceable because it was both procedurally and substantively unconscionable. After considering the briefs of the parties and hearing oral argument, the circuit court entered its order denying Petitioners' motion to enforce arbitration. It is from this ruling that Petitioners seek relief.

         II. Standard of Review

         As this Court held in syllabus point one of Credit Acceptance Corp. v. Front, 231 W.Va. 518, 745 S.E.2d 556 (2013), "[a]n order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine." Moreover, "[i]n cases, such as this, where the challenge to the arbitration clause is based on unconscionability, the issue presented is a question of law controlled by contract principles." Nationstar Mortg., LLC v. West, 237 W.Va. 84, 87-88, 785 S.E.2d 634, 637-38 (2016). As with all questions of law, our review of the circuit court's conclusion is plenary. See Syl. Pt. 1, West Virginia CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., W.Va., 796 S.E.2d 574 (2017) ("When an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo."). We proceed to determine whether the circuit court committed error in refusing to refer the underlying matter to arbitration.

         III. Discussion

         Petitioners argue the arbitration agreement is neither procedurally nor substantively unconscionable. "Whether an arbitration agreement was validly formed, and whether the claims maintained by the plaintiff fall within the scope of the agreement, are evaluated under state law principles of contract formation." State ex rel. Richmond Am. Homes of W.Va., Inc. v. Sanders, 228 W.Va. 125, 134, 717 S.E.2d 909, 918 (2011). This Court is mindful that

[i]n determining whether the language of an agreement to arbitrate covers a particular controversy, the federal policy favoring arbitration of disputes requires that a court construe liberally the arbitration clauses to find that they cover disputes reasonably contemplated by the language and to resolve doubts in favor of arbitration.

State ex rel. City Holding Co. v. Kaufman, 216 W.Va. 594, 598, 609 S.E.2d 855, 859 (2004) (citations omitted).

         As we observed in Brown ex rel. Brown v. Genesis Healthcare Corp. ("Brown I"), 228 W.Va. 646, 724 S.E.2d 250 (2011), rev'd on other grounds sub nom. Marmet Health Care Center, Inc. v. Brown, 132 S.Ct. 1201 (2012), "[t]he burden of proving that a contract term is unconscionable rests with the party attacking the contract." Brown I, 228 W.Va. at 680, 724 S.E.2d at 284. To conclude that a contractual term is unenforceable on grounds of unconscionability requires a finding that the provision in issue "is both procedurally and substantively unconscionable." Id. at 658, 724 S.E.2d at 262; see AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 340 (2011) (recognizing procedural element focuses on oppression or surprise due to unequal bargaining power and substantive element focuses on overly harsh or one-sided results). We address these elements in turn.

         A.

         With regard to procedural unconscionability, this Court held in syllabus point seventeen of Brown I that:

Procedural 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. 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.

228 W.Va. at 657, 724 S.E.2d at 261.

         The circuit court stated "the first indication that the arbitration agreement is procedurally unconscionable is that it is a contract of adhesion - allegedly offered to [Ms. Harless] as a 'this or nothing' condition of her employment." In addition, the circuit court found the signature page of the agreement was lacking in that it "failed to restate various provisions" contained in the agreement and did not contain the word "agreement." The circuit court concluded that Petitioners "have not provided any evidence that the procedure in which these 'acknowledgments' are presented to and obtained from an employee are reasonable and provide an opportunity for the employee to understand the terms."

         Petitioners assert Ms. Harless failed to put forth sufficient evidence to meet her burden of showing the agreement is procedurally unconscionable. We agree. "Because contracts of adhesion are by definition typically prepared by a party with more power, we do not view that factor as persuasive in itself." Nationstar Mortg., 237 W.Va. at 90, 785 S.E.2d at 640. Moreover, this Court has held that the omission of an "opt out" provision in an agreement that permits a party to reject arbitration is just one of multiple factors to consider in evaluating a claim of procedural unconscionability. Id. "As a result, the omission of an 'opt out' provision is not in itself sufficient evidence that an arbitration agreement is grossly unfair and thus unenforceable on grounds of procedural unconscionability." Id. Moreover, there is no evidence in the record to show that the manner or setting in which Ms. Harless received the Dispute Resolution Booklet or signed the acknowledgment form prevented her from having a reasonable opportunity to understand the terms of the agreement. See New v. GameStop, Inc., 232 W.Va. 564, 578, 753 S.E.2d 62, 76 (2013) ("'A court can assume that a party to a contract has read and assented to its terms, and absent fraud, misrepresentation, duress, or the like, the court can assume that the parties intended to enforce the contract as drafted.'") (quoting Adkins v. Labor Ready, Inc.,185 F.Supp.2d 628, 638 (S.D. W.Va. 2001). Ms. Harless' "bald assertions that the arbitration agreement is procedurally unconscionable because the agreement was not subject to negotiation and because she . . . had no other 'meaningful alternatives available to her' other than to sign" the agreement "are simply not sufficient." GameStop, ...


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