Opinion
No. 23-49
06-12-2024
AMPLER BURGERS OHIO LLC d/b/a Burger King, Lesley McLaughlin, Sheila Spaulding, and Teresa Stephens, Defendants Below, Petitioners, v. Kenna BISHOP, Plaintiff Below, Respondent.
Larry J. Rector, Esquire, Amy M. Smith, Esquire, Steptoe & Johnson PLLC, Bridgeport, West Virginia, Gregory W. Guevara, Esquire, Admitted Pro Hac Vice, Tyler J. Moorhead, Equire, Admitted Pro Hac Vice, Rose, McKinney & Evans, LLP, Indianapolis, Indiana, Counsel for Petitioners Rodney A. Smith, Esquire, M. Alex Urban, Esquire, Rod Smith Law PLLC, Charleston, West Virginia, Counsel for Respondent
Syllabus by the Court
1. "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." Syllabus Point 1, West Virginia CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W. Va. 465, 796 S.E.2d 574 (2017).
2. "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." Syllabus Point 6, 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, 565 U.S. 530, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012).
3. "Nothing in the Federal Arbitration Act, 9 U.S.C. § 2, overrides normal rules of contract interpretation. Generally applicable contract defenses—such as laches, estoppel, waiver, fraud, duress, or unconscionability— may be applied to invalidate an arbitration agreement." Syllabus Point 9, 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, 565 U.S. 530, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012).
4. "A valid written instrument which expresses the intent of the parties in plain and unambiguous language is not subject to judicial construction or interpretation but will be applied and enforced according to such intent." Syllabus Point 1, Cotiga Development Co. v. United Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962).
5. "It is not the right or province of a court to alter, pervert or destroy the clear meaning and intent of the parties as expressed in unambiguous language in their written contract or to make a new or different contract for them." Syllabus Point 3, Cotiga Development Co. v. United Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962).
6. "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 ex rel. Brawn 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, 565 U.S. 530, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012).
7. "The right to arbitration, like any other contract right, can be waived. To establish waiver of a contractual right to arbitrate, the party asserting waiver must show that the waiving party knew of the right to arbitrate and either expressly waived the right, or, based on the totality of the circumstances, acted inconsistently with the right to arbitrate through acts or language. There is no requirement that the party asserting waiver show prejudice or detrimental reliance." Syllabus Point 6, Parsons v. Halliburton Energy Services, Inc., 237 W. Va. 138, 785 S.E.2d 844 (2016).
Appeal from the Circuit Court of Kanawha County, The Honorable Tera L. Salango, Judge, Case Number: 21-C-820
Larry J. Rector, Esquire, Amy M. Smith, Esquire, Steptoe & Johnson PLLC, Bridgeport, West Virginia, Gregory W. Guevara, Esquire, Admitted Pro Hac Vice, Tyler J. Moorhead, Equire, Admitted Pro Hac Vice, Rose, McKinney & Evans, LLP, Indianapolis, Indiana, Counsel for Petitioners
Rodney A. Smith, Esquire, M. Alex Urban, Esquire, Rod Smith Law PLLC, Charleston, West Virginia, Counsel for Respondent
Armstead, Chief Justice:
Ampler Burgers Ohio LLC d/b/a Burger King, Lesley McLaughlin ("McLaughlin"), Sheila Spaulding ("Spaulding"), and Teresa Stephens ("Stephens") (collectively, "Petitioners") appeal the order of the Circuit Court of Kanawha County denying their motion to compel arbitration of the claims alleged by Kenna Bishop ("Respondent") in her complaint, all arising from her employment at the Elkview, West Virginia Burger King franchise. In its order denying the motion to compel, the circuit court found five independent reasons why arbitration could not be compelled: (1) Petitioner Ampler Burgers Ohio LLC is not a party to the arbitration agreement; (2) the arbitration agreement is unenforceable because it lacks mutual consideration; (3) the parties’ dispute is not subject to the arbitration agreement; (4) the arbitration agreement is procedurally and substantively unconscionable; and, (5) Petitioners waived their right to arbitration.
Robert Falls ("Falls") is a self-represented defendant below. He is not a party to this appeal.
For ease of reference, I use "Ampler Burgers" or "Ampler" to collectively refer to the petitioners, Ampler Burgers Ohio, LLC, d/b/a Burger King; Lesley McLaughlin; Sheila Spaulding; and Teresa Stephens.
Incidentally, the winning party in Morgan cited to Parsons in her briefs to the United States Supreme Court. See Brief of Petitioner Robyn Morgan, 2021 WL 6286090, at *26-27.
Respondent’s complaint alleges ten violations of The West Virginia Human Rights Act. ("WVHRA"). See W. Va. Code § 16B-17-1 to 21. The West Virginia Human Rights Act was previously codified in West Virginia Code § 5-11-1 to 21. During the 2024 Regular Session of the Legislature, the West Virginia Human Rights Act was recodified in Chapter 16B. See Acts 2024, S.B. 300, eff. Feb. 8, 2024. This recodification has no impact on this matter. The causes of action in the complaint contain allegations of a hostile work environment/sexual harassment, retaliation, and constructive discharge and are detailed below.
See also Syl. pt. 4, Bruce McDonald Holding Co. v. Addington, Inc., 241 W. Va. 451, 825 S.E.2d 779 (2019) ("The essential elements of the doctrine of waiver are: (1) the existence of a right, advantage, or benefit at the time of the waiver; (2) actual or constructive knowledge of the existence of the right, advantage, or benefit; and (3) intentional relinquishment of such right, advantage, or benefit.").
Without question, the Reid Burton factors cited by the majority opinion violate Morgan because they create a special prejudice test intended to support "the federal policy … to promote … the inclusion of a provision for arbitration of grievances[.]" Reid Burton, 614 F.2d at 702. The Tenth Circuit applied the factors and found that prejudice existed: While it is true that the trial court made no specific finding of prejudice, the sum and substance of those findings as a whole is one of prejudice and detriment to Burton…. The preparations until that time for trial in the court do, in our opinion, amount to sufficient prejudice that it is inequitable for a party at that point to shunt the controversy over to the arbitration procedures. Id. at 703 (emphasis added).
After review, we find that the circuit court erred in denying Petitioners’ motion to compel arbitration, and we reverse and remand for further proceedings consistent with this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
On March 23, 2021, Respondent began working at the Burger King location in Elkview, West Virginia. As a part of her hiring process, Respondent was presented with and signed a "Dispute Resolution and Arbitration Policy." ("Arbitration Agreement" or "Agreement"). The terms of the Arbitration Agreement required "all disputes relating to or arising out of an employee’s employment with the Company or the termination of employment [be arbitrated]." Additionally, the Arbitration Agreement further detailed that all "claims for wrongful termination of employment, breach of contract, employment discrimination, harassment or retaliation under … any state or local discrimination laws, tort claims, or any other legal claims and causes of action recognized by local, state or federal law or regulations" were also to be arbitrated.
The named parties to the Arbitration Agreement were Respondent and Ampler Burgers LLC, who is not a party to the civil action. In fact, Respondent was not employed by Ampler Burgers LLC but by Petitioner Ampler Burgers Ohio LLC. Ampler Burgers LLC and Ampler Burgers Ohio LLC are affiliated companies who share the same employee handbook and the same Arbitration Agreement. The individual Petitioners are all employees of Ampler Burgers Ohio LLC. By its plain terms, the Arbitration Agreement applies to "any such claim or dispute against [Ampler Burgers LLC] or any affiliated entities, and each of their employees, officers, directors or agents…. "
On September 15, 2021, Respondent filed suit in the Circuit Court of Kanawha County, naming an incorrect party, Ampler Restaurant Group, as a defendant. In that complaint, Respondent alleged that Falls touched her improperly, openly spoke about his sexual activity with young women, and showed pictures of himself engaged in sexual activity with young women to McLaughlin, who, was shift manager. McLaughlin, in turn, informed Respondent that everyone, including employees and management, were aware of Falls’ online presence. It was further alleged that Falls’ proclivity toward deviant sexual behavior had created a hostile work environment, where other employees openly spoke of their sexual wants and desires, including speculation about the sexual prowess of patrons of the restaurant. Respondent further averred that not only was McLaughlin aware of Falls’ activities, but that Spaulding, the restaurant’s general manager, and Stephens, the regional manager, were also aware but did nothing to protect Respondent. From those facts, Respondent alleged ten separate violations of the WVHRA. These include allegations of (1) a hostile work environment /sexual harassment against Ampler Burgers Ohio LLC, Falls, Spaulding, McLaughlin, and Stephens, (2) aiding and abetting a hostile work environment against Spaulding, McLaughlin, and Stephens, (3) retaliation by Ampler Burgers Ohio LLC, Falls, Spaulding, McLaughlin, and Stephens against Respondent, and (4) constructive discharge of Respondent by Ampler Burgers Ohio LLC, Falls, Spaulding, McLaughlin, and Stephens creating a hostile work environment.
After filing of the complaint, counsel for Petitioners and counsel for Respondent agreed to extend the time to answer the complaint and to answer discovery requests served upon Petitioners with the complaint. In its answer, filed on January 5, 2022, Petitioners identified Ampler Burgers Ohio LLC as the proper party to the action. Petitioners also asserted an affirmative defense in its answer: "[Respondent’s] purported claims against [Petitioners] are or may be governed by a mandatory arbitration provision."
For nearly ten months, until November 9, 2022, Petitioners and Respondent proceeded with the civil action. This activity included serving and answering discovery requests, agreeing to a protective order for transcripts generated in a parallel proceeding, agreeing to substitute Ampler Burgers Ohio LLC as a party for Ampler Burgers LLC, participating in a scheduling conference, filing of fact witness disclosures, and exchanging letters regarding alleged deficiencies in discovery. On November 9, 2022, Petitioners filed their Motion to Dismiss or Stay and Compel Arbitration.
Following briefing and a hearing, the circuit court denied the motion, in total, making specific findings of fact and conclusions of law. The circuit court found that none of the Petitioners were signatories to the Arbitration Agreement and that they could not enforce it. Similarly, the circuit court found that there was no mutual consideration for the Arbitration Agreement because Respondent did not accept employment with the signatory to the agreement, Ampler Burgers LLC, but was instead employed by Ampler Burgers Ohio LLC. Additionally, the circuit court found that because the Arbitration Agreement only applied to employment-related claims against Ampler Burgers LLC and Respondent was employed by Ampler Burgers Ohio LLC, any claims against Ampler Burgers Ohio LLC fell outside the scope of the Arbitration Agreement. Further, the circuit court determined that the Arbitration Agreement was both substantively and procedurally unconscionable, rendering the Arbitration Agreement unenforceable. Finally, on the waiver issue, the circuit court found that Petitioners’ "conduct shows that they had knowledge of the Arbitration Agreement, and instead of seeking to compel arbitration months ago elected to waive their rights under the Agreement and actively litigate in this Court." It is from the order denying Petitioners’ motion to compel arbitration that Petitioners appeal.
Specifically, the circuit court found that the Arbitration Agreement was procedurally unconscionable because Respondent did not have "a reasonable opportunity to understand' that she was entering an Agreement with Petitioner Ampler Burgers Ohio LLC to litigate claims against it." The circuit court also found the Arbitration Agreement was substantively unconscionable because it required complete confidentiality, did not allow for depositions unless ordered by the arbitrator, and required Respondent to arbitrate "all disputes relating to or arising out of [her] employment" while carving out exceptions allowing Ampler Burgers LLC the ability to seek injunctive relief "for unfair competition and/or the unauthorized disclosure of trade secrets or confidential information."
The circuit court further relied on the passage of more than a year between Ms. Bishop filing her complaint and Ampler Burgers filing its motion to compel arbitration. Notably, though, "delay alone is meaningless; it is the circumstances surrounding the defendant’s acts and language that determine whether the defendant implicitly intended to waive the right to arbitrate." Parsons v. Halliburton Energy Servs., Inc., 237 W. Va. 138, 149, 785 S.E.2d 844, 855 (2016).
I concede that the plaintiff named the wrong party in her complaint ("Ampler Restaurant Group"), but the right party got the complaint. Several months of delay occurred when Ampler asked the plaintiffs for extra time to answer the complaint, and extra time to answer discovery, and got both. Our holding in Parsons shows that simply asking for delay is not a litigation activity that waives arbitration. Parsons, 237 W. Va. at 149, 785 S.E.2d at 855 ("The delay alone is meaningless; it is the circumstances surrounding the defendant’s acts and language that determine whether the defendant implicitly intended to waive the right to arbitrate.").
The circuit court found that Petitioners waived arbitration by: (1) Obtaining extensions to answer the complaint; (2) Obtaining extensions to answer discovery served with the complaint; (3) Demanding a jury trial in their answers, by checking a box on the civil cover sheet; (4) Alleging arbitration as an affirmative defense in their answers; (5) Answering multiple discovery requests; (6) Serving multiple discovery requests; (7) Submitting an agreed order substituting Ampler Burgers Ohio LLC as the correct corporate entity; (8) Submitting an Agreed Protective Order; (9) Participating in at least one Scheduling Conference; and, (10) Exchanging communications regarding discovery issues.
Before the circuit court, Ms. Bishop claimed, without any supporting facts or analysis, that Ampler Burgers obtained discovery that it "likely would not have otherwise obtained." Ms. Bishop does not repeat this assertion on appeal, and I find no support for it in the record.
See, e.g., Thomas J. Lilly, Jr., Participation in Litigation as a Waiver of the Contractual Right to Arbitrate: Toward a Unified Theory, 92 Neb. L. Rev. 86 (2013) (arguing that a defendant should lose its right to compel arbitration if it fails to invoke the right in its answer); Noa Gutow-Ellis, Arguing Arbitration Waiver After Morgan v. Sundance: A Path to Hold Debt Buyers Accountable for Abusive Collection Litigation, 30 Cardozo J. Equal Rts. & Soc. Just. 193 (2023).
II. STANDARD OF REVIEW
[1, 2] We have held that "[w]hen an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo." Syl. Pt. 1, W. Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W. Va. 465, 796 S.E.2d 574 (2017). Additionally, decisions of circuit courts regarding arbitration agreements are immediately appealable under the collateral order doctrine. See Syl. Pt. 1, Credit Acceptance Corp. v. Front, 231 W. Va. 518, 745 S.E.2d 556 (2013). This is because arbitration offers "a more efficient and cost-effective alternative to court litigation." W. Va. Code § 55-10-2. Accord Parsons v. Halliburton Energy Servs., Inc., 237 W. Va. 138, 146, 785 S.E.2d 844, 852 (2016) ("Both federal and state laws reflect a strong public policy recognizing arbitration as an expeditious and relatively inexpensive forum for dispute resolution."). Keeping the standard of review in mind, we move to the assignments of error raised in this appeal.
III. ANALYSIS
[3, 4] Arbitration is a contractual process to which parties may turn to resolve their disputes. "[A]rbitration is simply a matter of contract between the parties; it is a way to resolve those disputes - but only those disputes - that the parties have agreed to submit to arbitration." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). By its terms, the Arbitration Agreement at issue falls under the provisions of the Federal Arbitration Act. In such cases:
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.
Syl. Pt. 6, 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, 565 U.S. 530, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012).
[5–10] An agreement to arbitrate, however, like other contractual agreements, is subject to our rules of contract interpretation. "Nothing in the Federal Arbitration Act, 9 U.S.C. § 2, overrides normal rules of contract interpretation. Generally applicable contract defenses—such as laches, estoppel, waiver, fraud, duress, or unconscionability—may be applied to invalidate an arbitration agreement." Syl. Pt. 9, Id. Thus, we are compelled to apply the plain language of the arbitration provision at hand. "A valid written instrument which expresses the intent of the parties in plain and unambiguous language is not subject to judicial construction or interpretation but will be applied and enforced according to such intent." Syl. Pt. 1, Cotiga Development Co. v. United. Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962). "It is not the right or province of a court to alter, pervert or destroy the clear meaning and intent of the parties as expressed in unambiguous language in their written contract or to make a new or different contract for them." Syl Pt. 3, Id.
The first four issues raised in the petition for appeal hinge on whether the Arbitration Agreement may be enforced by Ampler Burgers Ohio LLC. Thus, we begin our discussion with that issue.
A. Enforceability of the Arbitration Provision
[11, 12] The first issue raised in this appeal is whether the Arbitration Agreement applies to Petitioners. The circuit court found, and Respondent argues, that the Arbitration Agreement is unenforceable because it only applies to Ampler Burgers LLC, the signatory to the agreement. However: "[w]ell-established common law principles dictate that in an appropriate case a non[-]signatory can enforce, or be bound by, an arbitration provision within a contract executed by other parties." Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416-17 (4th Cir. 2000) (footnote omitted). Here, there is no question Respondent signed the Arbitration Agreement. In an attempt to avoid its provisions, Respondent argues that she was an employee c»f the non-signatory, affiliated entity, Ampler Burgers Ohio LLC, and because that entity did not sign the Arbitration Agreement, it cannot be enforced as to Respondent.
[13] However, by the Agreement’s plain language it is applicable to "any affiliated entities, and each of their employees, officers, directors or agents[.]" Black’s Law Dictionary defines affiliate as "[a] corporation that is related to another corporation by shareholdings or other means of control; a subsidiary, parent, or sibling corporation." Black's Law Dictionary (11th ed. 2019). It is undisputed that Ampler Burgers Ohio LLC is an affiliated entity of the signatory to the agreement, Ampler Burgers LLC. Further, Petitioners McLaughlin, Spaulding, and Stephens were all employees of Ampler Burgers Ohio LLC. There is also no dispute that Respondent contracted for employment at a Burger King restaurant owned by Ampler Burgers Ohio LLC. The employee handbook given to Respondent when she began work at Burger King is shared by Ampler Burgers LLC and Ampler Burgers Ohio LLC. Indeed, even though Ampler Burgers LLC is the party to the agreement, Respondent was never employed by that entity. "[T]he primary goal of a court construing a contract is to ascertain and give effect to the parties’ intent." Antero Res. Corp. v. Directional One Servs. Inc. USA, 246 W. Va. 301, 311, 873 S.E.2d 832, 842 (2022). Thus, it is clear that Respondent's actual intent was to enter into a contract with Ampler Burgers Ohio LLC to work at Burger King. See Syl. Pt. 1, Cotiga. Reading the plain language of the Arbitration Agreement, it clearly applies to all affiliated entities of Ampler Burgers LLC. Therefore, Ampler Burger Ohio LLC can, by resorting to the explicit language of the Arbitration Agreement, can enforce such Agreement as it relates to Respondent’s claims.
B. The Arbitration Agreement Is Supported By Consideration
[14] The next issue raised by Petitioners is whether the Arbitration Agreement is supported by consideration. The circuit court found, and Respondent argues, that the Arbitration Agreement lacks consideration because Respondent entered a contract with Ampler Burgers LLC, rather than Ampler Burgers Ohio LLC. Petitioners counter that the Arbitration Agreement is supported by sufficient consideration. We agree with Petitioners.
Respondent contends that because her employment was with Ampler Burgers Ohio LLC, she received no consideration from Ampler Burgers Ohio LLC to form a contract. However, we have already determined that Ampler Burgers Ohio LLC is bound by the Arbitration Agreement because Petitioners are either affiliated entities of Ampler Burgers LLC or employees of that affiliated entity. Under the plain language of the Arbitration Agreement, there are mutual promises to arbitrate: "I further acknowledge that in exchange for my agreement to arbitrate, the Company also agrees to submit all claims and disputes it may have with me to final and binding arbitration." We have already held that Ampler Burgers Ohio LLC may enforce the Arbitration Agreement against Respondent because Ampler Burgers Ohio LLC is an affiliated entity of Ampler Burgers LLC. Therefore, as discussed above, there were mutual obligations necessary for an enforceable contract.
We have said that "a mutual agreement to arbitrate is sufficient consideration to support an arbitration agreement." Hampden Coal, LLC v. Varney, 240 W. Va. 284, 291, 810 S.E.2d 286, 293 (2018). See also Taney v. EQT Corp., No. 13-1101, 2014 WL 2681091 at *3 (W. Va. June 13, 2014) (memorandum decision) ("[T]he mutual commitments to arbitrate alone constitute sufficient consideration to support the contract."); Citizens Telecomms. Co. of W. Va. v. Sheridan, 239 W. Va. 67, 75, 799 S.E.2d 144, 152 (2017) ("[T]he mutual commitment to arbitrate is sufficient consideration for the modification" of a contract that added an arbitration provision); Evans v. TRG Customer Solutions, Inc., No. 2:14-00663, 2014 WL 12659420 at *4 (S.D. W. Va. July 29, 2014), ("Under West Virginia law, a mutual agreement between an employer and employee to arbitrate their claims establishes adequate consideration."). Accordingly, the agreement to arbitrate is supported by mutual consideration.
C. Disputes Covered by the Arbitration Agreement
[15, 16] The circuit court found, and Respondent now argues, that because the only company signatory to the Arbitration Agreement was Ampler Burgers LLC, its language applying to "any and all claims and disputes that are related in any way to my employment or the termination of my employment with Ampler Burgers," means only Respondent’s disputes with Ampler Burgers LLC must be arbitrated. However, above, we resolved the question of whether Ampler Burgers Ohio LLC could enforce the Arbitration Agreement. Because we concluded it can, all of the claims raised in the complaint fall within the plain language of the Agreement as they are "related … to [Respondent’s] employment" with Ampler Burgers Ohio LLC. "In 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); Salem International University, LLC v. Bates, 238 W. Va. 229, 235, 793 S.E.2d 879, 885 (2016); SWN Production Company, LLC v. Long, 240 W. Va. 1, 7, 807 S.E.2d 249, 255 (2017); Hampden Coal, 240 W. Va. at 298, 810 S.E.2d at 300; C.S. v. Grow, No. 22-ICA-141, 2023 WL 7410618, at *5 (W. Va. Ct. App. Nov. 8, 2023) (memorandum decision).
We note that amendments made to the Federal Arbitration Act have ended the use of arbitration in claims such as those in this matter. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 banned the use of arbitration in sexual harassment claims. Pub, L. 117-90. § 2(a). Mar, 3, 2022. 136 Stat. 26., adding Chapter 4 to the Federal Arbitration Act and amending 9 U.S.C, § 3, eff. Mar. 3. 2022. No party argues this amendment is applicable to this case and we did not consider it because the date of the Arbitration Agreement and both the start and end date of Respondent's employment were before the effective date of the amendments.
The claims pleaded are plainly covered by the language of the Arbitration Agreement that states, "all disputes relating to or arising out of an employee’s employment with the Company or the termination of employment [shall be arbitrated]." The disputes subject to the Arbitration Agreement include "claims for wrongful termination of employment, breach of contract, employment discrimination, harassment or retaliation under … any state or local discrimination laws, tort claims, or any other legal claims and causes of action recognized by local, state or federal law or regulations." Factually, Respondent alleged that Falls engaged in wholly inappropriate workplace behavior and that McLaughlin, Spaulding, Stephens, and Ampler Burgers Ohio LLC were all aware of Falls’ actions but turned a blind eye. Thus, the dispute was within the purview of the Arbitration Agreement. D. Unconscionability
Specifically, the Arbitration Agreement: [C]overs all disputes relating to or arising out of an employee's employment with the Company or the termination of employment, The only disputes or claims not covered by this policy are those listed in the 'Exclusion's and Restrictions' section[.]" The Exclusions and Restrictions section provides certain issues may not be submitted to arbitration: Any non-waivable statutory claims, which may Include wage claims within the jurisdiction of a local or state labor commission or administrative agency[.] charges before the Equal Employment Opportunity Commission, National Labor Relations Board, or similar local or state agencies, are not subject to exclusive review by arbitration. This means that you may file such non-waivable statutory claims with the appropriate agency that has jurisdiction over them if you wish, regardless of whether you decide to use arbitration to resolve them. However, if such an agency completes its processing of your action against the Company, you must use arbitration if you wish to pursue further your legal rights, rather than filing a lawsuit on the action. Arbitration also does not apply to claims by the Company for injunctive relief and/or other equitable relief lot unfair competition and/or the use of unauthorized disclosure of trade secrets or confidential information, relief for which may be sought in court. …. Sexual Harassment Complaints; Due to the sensitive nature of claims of sexual harassment, you are allowed to follow the steps in the Company's policy prohibiting sexual harassment. If you are not satisfied with the Company's response to a claim for sexual harassment, then you must use final and binding arbitration to resolve the claim or dispute. (emphasis to last sentence added).
[17–19] Petitioners’ next assignment of error alleges that the circuit court erred in finding the Arbitration Agreement to be a contract of adhesion that is both procedurally and substantively unconscionable. "A contract of adhesion is one drafted and imposed by a party of superior strength that leaves the subscribing party little or no opportunity to alter the substantive terms, and only the opportunity to adhere to the contract or reject it." Syl. Pt. 18, in part, Brown. Although the circuit court found the Arbitration Agreement to be a contract of adhesion, even if we accept such conclusion, our inquiry does not end there. "[F]inding that there is an adhesion contract is the beginning point for analysis, not the end of it; what courts aim at doing is distinguishing good adhesion contracts which should be enforced from bad adhesion contracts which should not." State ex rel. Dunlap v. Berger, 211 W.Va. 549, 557, 567 S.E.2d 265, 273 (2002). To do so, we have said that "[p]rocedural and substantive unconscionability often occur together, and the line between the two concepts is often blurred. For instance, overwhelming bargaining strength against an inexperienced party (procedural unconscionability) may result in an adhesive form contract with terms that are commercially unreasonable (substantive unconscionability)." Brown, 228 W. Va. at 681, 724 S.E.2d at 285. Indeed, under West Virginia law, we have 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.
Syl. Pt. 20, Brown.
[20–23] Thus, we first examine procedural unconscionability, which focuses upon the actions of the parties in the formation of the Arbitration Agreement:
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.
Syl. Pt. 17, Id. "Procedural unconscionability may be found in contracts of adhesion when there is an imbalance in bargaining power, absence of meaningful choice, unfair surprise, or sharp or deceptive practices[.]" Brown, 228 W. Va. at 682, 724 S.E.2d at 286.
[24] At the time the Arbitration Agreement was signed, Bishop was an eighteen-year-old adult. There is no evidence that she could not read or understand the Agreement. The Arbitration Agreement terms were never hidden from her and she signed it electronically on the day she began her employment. This Court has recognized that "[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." New v. GameStop, Inc., 232 W. Va. 564, 578, 753 S.E.2d 62, 76 (2013) (internal quotation omitted). Respondent had a reasonable opportunity to understand the terms of the Arbitration Agreement, thus we do not believe it to be procedurally unconscionable.
[25–28] We next look at substantive unconscionability which delves into the terms of the contract itself:
Substantive 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.
Syl. Pt. 19, Id. The circuit court found that the Arbitration Agreement was substantively unconscionable because its terms were "exceptionally one-sided with an overly harsh effect," which, (1) required complete confidentiality; (2) imposed extreme limitations on discovery; (3) prohibited taking depositions unless ordered by the arbitrator; (4) limited written discovery to a "reasonable request for copies of relevant documents from each other"; and, (5) required Ms. Bishop to arbitrate all disputes yet "carved out ‘claims for the Company for injunctive relief and/or other equitable relief for unfair competition and/or the unauthorized disclosure of trade secrets or confidential information, relief for which may be sought in court.’ " We disagree with the circuit court's findings.
[29] Although the Arbitration Agreement required complete confidentiality and contained discovery limitations, these constraints apply mutually to all parties. "Agreements to arbitrate must contain at least ‘a modicum of bilaterality’ to avoid unconscionability." State ex rel. Richmond Am. Homes of W. Va., Inc. v. Sanders, 228 W. Va. 125, 137, 717 S.E.2d 909, 921 (2011) (footnote omitted). Because these requirements apply equally to all parties, the agreement reflects, at a minimum, a "modicum of bilaterality." "Any limits will apply equally to both parties." Cottonwood Fin., Ltd., v. Estes, 339 Wis.2d 472, 485, 810 N.W.2d 852, 859 (Wis. Ct. App. 2012). There are mutual limitations on confidentiality and discovery which are constraints upon all parties, not just Respondent. Thus, these provisions are not one-sided in any sense of the word.
As for confidentiality, the Arbitration Agreement provides that, "[a]ll statements and information made or revealed during arbitration are confidential, and neither you nor the Company may reveal any such statements or information, except on a ‘need to know’ basis or as permitted or required by law." (emphasis added). Discovery protocols in the Arbitration Agreement provide: If a dispute is submitted to arbitration, either you or the Company may make a reasonable request for copies of relevant documents from each other, and both parties shall provide each other with a list of the witnesses they intend to call to testify at the arbitration at least ten days before the arbitration, unless otherwise provided by the arbitrator. No depositions or other discovery shall be taken unless ordered by the arbitrator. Disputes submitted for resolution under this policy may be amended as provided by the AAA rules. (emphasis added).
Additionally, the circuit court’s order finds that because Petitioners have carve-outs for "claims by the Company for injunctive relief and/or other equitable relief for unfair competition and/or the unauthorized disclosure of trade secrets or confidential information," the Arbitration Agreement is "exceptionally one-sided." We disagree, We examined a similar arbitration provision in State ex rel. Ocwen Loan Servicing, LLC v. Webster, 232 W. Va. 341, 752 S.E.2d 372 (2013). In that case, the arbitration agreement excluded certain claims by Ocwen from arbitration. The excluded claims revolved around Ocwen’s ability to accelerate payments, to protect their rights under a security agreement, and to require payment in full in certain situations. See id., 232 W. Va. at 363-4, 752 S.E.2d at 394-5. We held that "the exclusions from arbitration reserved by Ocwen grants it the ability to utilize the court system to protect its security interest in the Currys’ home." Id., 232 W. Va. at 365, 752 S.E.2d at 396.
[30] Similarly, the right of Petitioners to certain carve-outs allows Petitioners to seek emergency relief from a court to protect trade secrets and unfair competition. Injunctive relief is not something an arbitrator can grant. Allowing Petitioners to seek relief in court in such circumstances does not "create[ ] a disparity in the rights of the contracting parties such that it is one-sided and unreasonably favorable to" Petitioners. Syl. Pt. 10, in part, Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281, 737 S.E.2d 550 (2012).
E. Waiver of Arbitration
The final issue raised in this appeal is whether Petitioners’ participation in the litigation process constituted a waiver of the Arbitration Agreement. Specifically, as noted above, the circuit court found waiver because Petitioners had: (1) obtained extensions to answer the complaint; (2) obtained extensions to answer discovery served with the complaint; (3) demanded a jury trial in their answers, by checking a box on the civil cover sheet; (4) alleged arbitration as an affirmative defense in their answers; (5) answered multiple discovery requests; (6) served multiple discovery requests; (7) submitted an agreed order substituting Ampler Burgers Ohio LLC as the correct corporate entity; (8) submitted an Agreed Protective Order; (9) participated in at least one Scheduling Conference; and, (10) exchanged communications regarding discovery issues.
[31] We have held that engagement in litigation activities can waive an otherwise valid arbitration agreement. See Parsons. In Parsons, the question of whether arbitration was waived rested upon an analysis of active participation in the litigation, stemming from "volunteering to produce class-wide discovery and by repeatedly seeking extensions of time to file a responsive pleading." Id., 237 W. Va. at 144, 785 S.E.2d at 850. We discussed how a waiver occurs in Parsons, concluding:
Waiver of a contract right may be made by an express statement or agreement, or it may be implied from the conduct of the party who is alleged to have waived a right. "Waiver may be established by express conduct or impliedly, through inconsistent actions." Ara, 182 W. Va. at 269, 387 S.E.2d at 323. "Of course[,] a waiver may be express or it may be inferred from actions or conduct, but all the attendant facts, taken together, must amount to an intentional relinquishment of a known right, in order that a waiver may exist." Blue v. Hazel–Atlas Glass Co., 106 W. Va. 642, 650, 147 S.E. 22, 25–26 (1929).
Id. As a result of that analysis, we found that the right to arbitrate had not been waived in that case by participation in litigation and we clarified that:
The right to arbitration, like any other contract right, can be waived. To establish waiver of a contractual right to arbitrate, the party asserting waiver must show that the waiving party knew of the right to arbitrate and either expressly waived the right, or, based on the totality of the circumstances, acted inconsistently with the right to arbitrate through acts or language. There is no requirement that the party asserting waiver show prejudice or detrimental reliance.
Syl. Pt. 6, Id.
[32] When assessing waiver, we are mindful that there is a strong public policy favoring arbitration agreements and that the party asserting waiver carries a heavy burden. One legal treatise has explained that:
[I]n view of the strong public policy favoring arbitration agreements, the courts are required to resolve any doubt concerning waiver in favor of arbitration. Close questions whether a waiver of the obligation to arbitrate has occurred are to be resolved in favor of arbitration. Moreover, there is a strong presumption against the waiver of contractual arbitration rights. The burden of persuasion lies with the party claiming that the right to demand arbitration has been waived. The burden on one seeking to prove a waiver is a heavy one.
21 Williston on Contracts § 57:16 (4th ed. 2023) (internal footnotes omitted).
Thus, the question in this matter turns on whether Respondent met her heavy burden of showing that Petitioners acted inconsistently with their right to arbitrate. We find that she did not. See J & S Const. Co., Inc. v. Travelers Indem. Co., 520 F.2d 809, 809 (1975) (defendant did not waive its right to invoke arbitration after filing an answer, demanding a jury trial, answering interrogatories, participating in depositions, and waiting more than one year before demanding arbitration.).
[33] The United States Court of Appeals for the Tenth Circuit has posited several factors to consider if litigation has waived arbitration:
In determining whether a party to an arbitration agreement, usually a defendant, has waived its arbitration right, federal courts typically have looked to whether the party has actually participated in the lawsuit or has taken other action inconsistent with his right; whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit by the time an intention to arbitrate was communicated by the defendant to the plaintiff; whether there has been a long delay in seeking a stay or whether the enforcement of arbitration was brought up when trial was near at hand.
Other relevant factors are whether the defendants have invoked the jurisdiction of the court by filing a counterclaim without asking for a stay of the proceedings [and] whether important intervening steps had taken place[.]
Reid Burton Const., Inc. v. Carpenters Dist. Council of S. Colorado, 614 F.2d 698, 702 (10th Cir. 1980) (internal citations omitted).
We note that under West Virginia law, prejudice is not a factor we consider in this analysis. See Syl. Pt. 6, Parsons. Likewise, after Reid Burton was decided, the United States Supreme Court clarified that prejudice is not a factor in determining if a waiver has occurred under the Federal Arbitration Act. See Morgan v. Sundance, Inc., 596 U.S. 411, 419, 142 S.Ct. 1708, 212 L.Ed.2d 753 (2022).
[34] Applying these factors to the facts of this case, we conclude that Respondent failed to show that Petitioners waived the right to arbitrate this matter. First, the ten-month period between the time the complaint and the motion to compel arbitration were filed was not sufficient to establish a waiver under the totality of circumstances in this case, especially since Petitioners' answer specifically raised arbitration as an affirmative defense. Indeed, after the filing of the complaint, the parties spent two months ensuring the proper party, Ampler Burgers Ohio LLC, was named in the civil action. During that time, extensions to answer the complaint and the discovery served with the complaint were obtained by Petitioners.
Second, the litigation process had barely begun when the motion to compel was filed. No party had asked the circuit court to make a ruling on any issue. Petitioners did not seek any affirmative relief from the court until they filed their motion to compel arbitration. Indeed, although Petitioners had responded to and served discovery requests and exchanged communications regarding discovery issues, the case was still in its infancy when the motion to compel arbitration was filed. Third, although a scheduling conference had been held, the matter had not progressed to the point that it was near trial.
[35, 36] Fourth, Petitioners did not file a counterclaim and they took no other intervening steps, nor did they engage in a lengthy motions practice, prior to invoking their right to arbitration. As we have previously stated, "[t]he delay [in filing a motion to compel arbitration] alone is meaningless; it is the circumstances surrounding the defendant’s acts and language that determine whether the defendant implicitly intended to waive the right to arbitrate." Parsons, 237 W. Va. at 149, 785 S.E.2d at 855. Simply put, the actions taken by Petitioners were insufficient to constitute a waiver of Petitioners’ right to enforce the Arbitration Agreement.
One issue that the circuit court points to in support of waiver is that Petitioners "demanded a jury trial." The circuit court found that the act of checking a box on the civil case information sheet was a jury demand. However, Petitioners neither filed a formal demand for a jury trial nor included such demand in their answer. See W. Va. R. C. P. 38(b). ("Any party may demand a trial by jury of any issue triable of right by a jury by (1) serving upon the other parties a demand therefor in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed to such issue, and (2) filing the demand as required by Rule 5(d), Such demand may be indorsed upon a pleading of the party.").
In other cases, actions that do not constitute waiver of the right to arbitration include defending litigation seeking to enforce an arbitration award. See Cabot Oil & Gas Corporation v. Beaver Coal Company, Limited, Nos. 16-0904 and 16-0905, 2017 WL 5192490, at *7 (W. Va. Nov 9, 2017) (memorandum decision). Further, the act of filing a debt collection action and then later responding to a counterclaim filed in that anion four and a half years later with a motion to compel arbitration does not waive arbitration. See Citibank, N.A. v. Perry, 238 W. Va. 662, 666, 797 S.E.2d 803, 807 (2016).
We therefore conclude that Petitioners did not waive their right to arbitration by engaging in limited litigation activities prior to the filing of the motion to compel.
IV. CONCLUSION
Accordingly, the circuit court’s order denying the motion to compel arbitration is reversed and this matter is remanded for further proceedings consistent with this opinion.
Reversed and remanded with Instructions.
JUSTICE BUNN concurs and reserves the right to file a separate opinion.
JUSTICE HUTCHISON dissents and reserves the right to file a separate opinion.
JUSTICE WOOTON dissents and reserves the right to file a separate opinion.
BUNN, Justice, concurring:
I agree with the majority’s ultimate resolution of this case. The circuit court erred by denying Ampler Burgers’1a motion to compel arbitration, so reversing the denial and remanding for further proceedings is proper. While this opinion reaches the correct result, I write separately to elaborate on the majority’s analysis of waiver. The majority’s waiver analysis fails to thoroughly consider Ampler Burgers’ conduct, particularly its participation in discovery. Applying a more thorough analysis still leads to the conclusion that Ampler Burgers did not waive its right to arbitration. Accordingly, I respectfully concur.
The circuit court found that Ampler Burgers impliedly waived its right to arbitration. "As with any contract right, an arbitration requirement may be waived through the conduct of the parties." State ex rel. Barden & Robeson Corp. v. Hill, 208 W. Va. 163, 168, 539 S.E.2d 106, 111 (2000). To establish implied waiver under West Virginia law, Ms. Bishop, as the party asserting waiver, had to show that Ampler Burgers acted inconsistently with its right to arbitrate:
The right to arbitration, like any other contract right, can be waived. To establish waiver of a contractual right to arbitrate, the party asserting waiver must show that the waiving party knew of the right to arbitrate and either expressly waived the right, or, based on the totality of the circumstances, acted inconsistently with the right to arbitrate through acts or language. There is no requirement that the party asserting waiver show prejudice or detrimental reliance.
Syl. pt. 6, Parsons v. Halliburton Energy Servs., Inc., 237 W. Va. 138, 785 S.E.2d 844 (2016).2a
To determine whether Ms. Bishop met her burden, Ampler Burgers’ conduct must be examined in light of the totality of the circumstances.
The common-law doctrine of waiver focuses on the conduct of the party against whom waiver is sought, and requires that party to have intentionally relinquished a known right. A waiver may be … inferred from actions or conduct, but all of the attendant facts, taken together, must amount to an intentional relinquishment of a known right.
Syl. pt. 2, in part, Parsons, 237 W. Va. 138, 785 S.E.2d 844. Accord Schwebke v. United Wholesale Mortg. LLC, 96 F.4th 971, 976 (6th Cir. 2024) ("[T]he waiver analysis rests on the totality of the circumstances—not on any bright-line rule."); Armstrong v. Michaels Stores, Inc., 59 F.4th 1011, 1015 (9th Cir. 2023) (to assess "whether [a party] took acts inconsistent with its right to arbitration, we consider the totality of the [party’s] actions … [and] ask whether those actions holistically indicate a conscious decision … to seek judicial judgment on the merits of the arbitrable claims, which would be inconsistent with a right to arbitrate." (quotations and citations omitted)).
Ms. Bishop had to establish waiver by clear and convincing evidence. "[W]here the alleged waiver is implied, there must be clear and convincing evidence of the party’s intent to relinquish the known right." Potesta v. U.S. Fid. & Guar. Co., 202 W. Va. 308, 315, 504 S.E.2d 135, 142 (1998). See also Hoffman v. Wheeling Sav. & Loan Ass’n, 133 W. Va. 694, 713, 57 S.E.2d 725, 735 (1950) (" ‘A waiver of legal rights will not be implied, except [by] clear and unmistakable proof of an intention to waive such rights.’ " (citation omitted)).
Federal cases are now instructive as to the types of conduct that might signal an implied waiver. Previously, the federal waiver analysis included a prejudice element in most jurisdictions. However, in 2022, the United States Supreme Court considered whether prejudice should be an element of waiver in the context of arbitration contracts even though it is not part of the waiver analysis for other types of contracts. See Morgan v. Sundance, Inc., 596 U.S. 411, 142 S. Ct. 1708, 212 L. Ed. 2d 753 (2022). Because arbitration contracts should be treated like all other contracts, the Morgan Court rejected an arbitration-specific waiver rule that requires proof of prejudice. Id. at 416, 142 S. Ct. at 1712, 212 L. Ed. 2d 753. Following Morgan, federal courts addressing waiver have applied a standard like ours, which does not consider prejudice.
When considering evidence of implied waiver, federal courts have examined whether the defendant substantially invoked litigation machinery. Breadeaux’s Pisa, LLC v. Beckman Bros., 83 F.4th 1113, 1117 (8th Cir. 2023) ("Arbitration can be waived … by substantially invok[ing] the litigation machinery rather than promptly seeking arbitration." (quotations and citations omitted)); Payne v. Savannah Coll. of Art & Design, Inc., 81 F.4th 1187, 1201 (11th Cir. 2023) ("Our waiver doctrine is typically implicated when parties have invoked the litigation machinery before reversing course and claiming that arbitration was the proper avenue all along." (quotations and citation omitted)).
Seeking dispositive rulings or taking advantage of being in court are evidence of substantially invoking the litigation machinery. See, e.g., Nicosia v. Amazon.com, Inc., No. 21-2624-cv, 2023 WL 309545, at *4 n.2 (2d Cir. Jan. 19, 2023) (acknowledging that defendant Amazon had not waived arbitration because it had not "engaged in litigating any substantial merits questions before seeking arbitration" (quotations and citation omitted)); Schwebke, 96 F.4th at 976 ("[I]n most of our cases finding arbitration waiver, there has been an affirmative request for relief, such as the filing of a dispositive motion."); Armstrong, 59 F.4th at 1015 ("[A] party generally acts inconsistently with exercising the right to arbitrate when it (1) makes an intentional decision not to move to compel arbitration and (2) actively litigates the merits of a case for a prolonged period of time in order to take advantage of being in court." (quotations and citation omitted)). Here, Ampler did not "substantially invoke the litigation machinery" as it did not seek dispositive rulings on the merits or obtain an advantage from being in court.
In finding sufficient evidence of intentional waiver of Ampler Burgers’ right to arbitrate, the circuit court relied on Ampler’s actions in:
answering and responding to two sets of discovery, supplementing discovery, responding to meet-and-confer emails and letters, entering an Agreed Protective Order, attending two scheduling conferences, negotiating an Agreed Order for Substitution of Party, participating in several emails and telephone calls, asking for deadline extensions, and making repeated requests for all of the deposition transcripts in the earlier matter.
The circuit court’s order also stated that Ampler "demanded a jury trial" in its Civil Case Information Statement.3a The most significant conduct Ampler engaged in was participating in discovery. Ampler propounded and responded to discovery requests, responded to Ms. Bishop’s discovery-related meet-and-confer communications, and participated in entering an agreed protective order. However, when properly viewed in light of the surrounding circumstances, these facts do not establish by clear and convincing evidence that Ampler intended to forgo its right to arbitrate.
Regarding Ampler’s discovery activities, Ms. Bishop responded to Ampler Burgers’ motion seeking to compel arbitration by arguing, in part, that Ampler filed its motion only after it had obtained "nearly 2,000 pages of testimony and exhibits" it "likely would not have otherwise obtained." These documents consisted of ten deposition transcripts, with exhibits, that were generated in another matter being litigated by Ms. Bishop’s lawyer. In replying to Ms. Bishop’s argument, Ampler tendered a declaration by one of its lawyers. This declaration explained that, during a phone conversation, Ms. Bishop’s counsel described these deposition transcripts as "explosive discovery" that he wanted Ampler’s counsel to review in considering the merits of Ms. Bishop’s claims. In subsequent emails between counsel for Ms. Bishop and Ampler, the attorneys discussed the discovery materials and the need to determine whether the materials were covered under an existing protective order. In her brief to this Court, Ms. Bishop does not refute the evidence that her counsel offered the purportedly "explosive discovery," subject to an appropriate protective order, for Ampler’s counsel to consider in assessing the merits of Ms. Bishop’s claims in this action.
Similarly, to the extent that Ms. Bishop’s counsel considered the documents produced as "explosive discovery" that Ampler’s counsel should consider, it does not appear that the documents provided Ampler with any unfair advantage to assert in subsequent arbitration. Furthermore, Ampler contends that it would have obtained this discovery in the arbitral forum.4a Before the circuit court, Ampler noted that, according to its terms, the arbitration agreement was governed by American Arbitration Association Employment Dispute Resolution Rules. Pursuant to Rule 9 of those rules, "[t]he arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute." Additionally, the arbitration agreement Ms. Bishop signed expressly permitted the parties to "make a reasonable request for copies of relevant documents from each other." Under these circumstances, Ampler’s efforts to negotiate an acceptable protective order to receive "explosive discovery" that Ms. Bishop’s counsel first offered, and its receipt of that discovery, which likely would be available in arbitration, do not indicate by clear and convincing evidence that Ampler intentionally waived its right to arbitration.
Another ground for waiver relied on by the circuit court involved Ampler’s cooperation with Ms. Bishop to enter an "Agreed Order for Substitution of Party." The purpose of this agreed order was to correct Ms. Bishop’s complaint, which erroneously identified "Ampler Restaurant Group" as the corporate defendant when the correct entity was Ampler Burgers Ohio, LLC. As Ampler aptly contends, it could not have sought to compel arbitration until it was a properly named party to the litigation, and it filed its motion to compel just over two months after it was properly substituted pursuant to the agreed order. Thus, this conduct does not reflect Ampler’s intent to forego arbitration.
Similarly, the circuit court incorrectly concluded that Ampler demonstrated its intent to litigate in lieu of arbitration because it "demanded a jury trial." Factually, the circuit court relied on Ampler’s "Civil Case Information Statement," on which it checked a box indicating "Yes" after the phrase "Jury Demand." Significantly, Ms. Bishop’s complaint plainly demanded a jury trial. Thus, Ampler checking "yes" in response to the phrase "Jury Demand" could easily have been nothing more than an acknowledgement that Ms. Bishop had already demanded a jury trial. Ampler’s failure to demand a jury trial in its answer or to make a separate written jury demand as required by our Rules of Civil Procedure support this interpretation. See W. Va. R. Civ. P. 38 (requiring that a jury demand be in writing and served on other parties). See also Louis J. Palmer, Jr. & Robin Jean Davis, Litigation Handbook On West Virginia Rules of Civil Procedure, § 38(b)[2], at 1039 (5th ed. 2017) ("A demand for trial by jury … must be in writing…. A party may demand a trial by jury in his/her pleading. As a general matter, courts hold that marking the jury box on a civil cover sheet does not satisfy the rule. The demand must be served upon the other party or parties." (footnotes omitted)).
Other conduct relied upon by the circuit court and Ms. Bishop to demonstrate implied waiver includes Ampler obtaining extensions to answer the complaint, participating in scheduling conferences, and communicating through emails and telephone calls. However, these routine matters do not involve litigation of any issues on the merits or an affirmative request for relief. See Schwebke, 96 F.4th at 976 ("[I]n most of our cases finding arbitration waiver, there has been an affirmative request for relief, such as the filing of a dispositive motion."); Fox v. Experian Info. Sols., Inc., No. 1-22-CV-01197-DAD-DB, — S.E.2d —, —, 2024 WL 755804, at *5 (E.D. Cal. Feb. 23, 2024) (finding certain filings in a case did not indicate waiver because "none sought judicial resolution of plaintiff’s claims on the merits and together they do not present ‘a clear narrative of … strategic choice to engage the judiciary for resolution of the … claims rather than to obtain a resolution from an arbitrator’ ").
In this case, Ampler Burgers did not seek to conceal the existence of the arbitration agreement. It first raised the possible existence of a governing arbitration agreement as an affirmative defense in its answer to Ms. Bishop’s complaint. Thereafter, Ampler produced the arbitration agreement in its response to Ms. Bishop’s initial discovery request. As explained above, when properly viewed in light of all the circumstances, the conduct relied upon by the circuit court falls short of demonstrating implied waiver by clear and convincing evidence. "The burden of proof to establish waiver is on the party claiming the benefit of such waiver, and is never presumed." Hoffman, 133 W. Va. at 713, 57 S.E.2d at 735. Accord Potesta, 202 W. Va. at 315, 504 S.E.2d at 142; Baker v. Baker, 793 F. App’x 181, 185 (4th Cir. 2019). See also Mundy v. Arcuri, 165 W. Va. 128, 131, 267 S.E.2d 454, 457 (1980) ("One who asserts waiver … has the burden of proving it."). Ms. Bishop failed to meet her burden to establish Ampler’s implied waiver by clear and convincing evidence. Accordingly, I respectfully concur because I would have conducted a different waiver analysis than that employed by the majority.
Justice Hutchison, dissenting, joined by Justice Wooton:
I dissent from the majority's opinion that compels plaintiff Kenna Bishop to arbitrate her complaint. The opinion gives five different reasons why the trial court erred, but the first four are inconsequential fluff. It is the fifth section, pertaining to the concept of contractual waiver, that is controlling in this case. By every measure, Ampler Burgers Ohio LLC ("Ampler") waived its right to arbitration. Therefore, the majority opinion is dead wrong in its application of Syllabus Point 6 of Parsons v. Halliburton Energy Servs., Inc., 237 W. Va. 138, 785 S.E.2d 844 (2016). I say this because, while the majority footnotes the central holding of Parsons (that one party’s waiver does not require prejudice to be suffered by another party), the majority ignores Parsons and instead does a prejudice analysis to reach its conclusion no waiver occurred, albeit without using the word "prejudice." It also employs an analysis that violates the Federal Arbitration Act.
I start my analysis with the overarching question: How does a party to a contract waive a right given to them in the contract’s terms? The answer: the same way any right is waived, by having knowledge of the right (actual or constructive), and then acting in a way contrary to that right such that any outside observer would believe the party has relinquished the right. "To effect a waiver, there must be evidence which demonstrates that a party has intentionally relinquished a known right." Syl. pt. 2, Ara v. Erie Ins. Co., 182 W. Va. 266, 387 S.E.2d 320 (1989). "A waiver may be express or may be inferred from actions or conduct, but all of the attendant facts, taken together, must amount to an intentional relinquishment of a known right." Syl. pt. 2, in part, Parsons, 237 W. Va. at 141, 785 S.E.2d at 847.
The Court in Parsons emphasized that waiver of a right is an individual, unilateral choice. Waiver occurs irrespective of its impact on any other party and of the actions by any other party.
Waiver does not require proof of prejudice or detrimental reliance because waiver is within the control of the party who chooses to relinquish a condition in the contract, quite apart from whether another party relies on relinquishment. Waiver is essentially unilateral in its character; it results as a legal consequence from some act or conduct of the party against whom it operates; no act of the party in whose favor it is made is necessary to complete it.
Id. at 144, 785 S.E.2d at 850 (cleaned up). To emphasize the point that a party can waive a contract right regardless of whether an opposing party is prejudiced, the Court in Parsons overruled several cases that suggested waiver might "require proof of prejudice or detrimental reliance." Id. at 146, 785 S.E.2d at 852.
The Parsons Court explicated the doctrine of waiver in the general context of all contracts. The Court then noted the well-established rule that the Federal Arbitration Act ("the FAA") places "arbitration agreements on the same footing as other contracts, where [they] belong." Id. at 147, 785 S.E.2d at 853 (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985)) (quoting H.R.Rep. No. 96, 68th Cong., 1st Sess., 1 (1924)). Essentially, because of the FAA courts cannot devise special tests, rules, or guidelines for arbitration contracts that would not apply to other general contracts. Hence, the Parsons Court concluded that the general rule of waiver also extended to arbitration agreements.
The majority cites to Syllabus Point 6 of Parsons, which contains this extension-of-waiver-to-arbitration rule, and which provides:
The right to arbitration, like any other contract right, can be waived. To establish waiver of a contractual right to arbitrate, the party asserting waiver must show that the waiving party knew of the right to arbitrate and either expressly waived the right, or, based on the totality of the circumstances, acted inconsistently with the right to arbitrate through acts or language. There is no requirement that the party asserting waiver show prejudice or detrimental reliance.
(Emphasis added). The United States Supreme Court, in Morgan v. Sundance, Inc., 596 U.S. 411, 419, 142 S.Ct. 1708, 212 L.Ed.2d 753 (2022), mirrored Parsons in that it rejected any requirement of prejudice in its test to determine whether waiver of an arbitration agreement existed. The Morgan Court likewise stated that it rejected a prejudice requirement because general contract law does not require prejudice, and "the FAA’s ‘policy favoring arbitration’ does not authorize federal courts to invent special, arbitration-preferring procedural rules." Id., at 481, 142 S.Ct. 1708.1b The majority opinion did cite Morgan, but just once, and in a footnote.
In Parsons, decided eight years ago, this Court rejected the panoply of "federal and state cases with a broad spectrum of factors and guidelines for courts to consider" in deciding whether a contractual right to arbitration had been waived. Id. at 148, 785 S.E.2d at 854. The majority opinion not only sidesteps this language in Parsons, but it also sidesteps the U. S. Supreme Court’s admonition not to create special rules for arbitration contracts not already extant for other con- tracts because those rules violate the FAA. Instead, the majority opinion quotes and applies a forty-four-year-old federal Tenth Circuit Court of Appeals case that lists the factors and guidelines courts should consider in deciding whether an arbitration agreement has been waived. See Reid Burton Const., Inc. v. Carpenters Dist. Council of S. Colorado, 614 F.2d 698, 702 (10th Cir. 1980). Worse, the majority opinion wholly omits any discussion that the Tenth Circuit expressly adopted the Reid Burton factors and guidelines to (1) weigh whether prejudice arose, (2) exclusively in the context of arbitration contracts.2b Importantly, cases like Reid Burton were disavowed in Parsons and by the U. S. Supreme Court in Morgan, yet the majority opinion chose to base its opinion on those factors for assessing prejudice. Except, of course, the majority opinion never used, the word "prejudice."
In addition to being a "special" approach devised exclusively for arbitration cases (and hence, in violation of the FAA), the majority opinion’s approach suggests an ad hoc, variable, fairness analysis. Such an analysis is inexact and, in the future, will impose delay, uncertainty, and costs on litigants and on the judicial system. The facts of this case show that, after the plaintiff filed her complaint, and despite Ampler never saying it was waiving arbitration, Ampler engaged in litigation activities with the plaintiff and obtained discovery materials it could never have obtained in arbitration. The parties litigated, in court, for some 400 days, before Ampler asserted that it had a contract right to arbitration.3b These attendant facts, taken together, indicate that Ampler repeatedly acted contrary to its known right to arbitrate and, thus, waived that right.
The majority makes light of what happened after the plaintiff filed suit, boiling it down to one sentence: "the litigation process had barely begun when the motion to compel was filed." Balderdash. In reality, and directly contrary to Ampler’s right to invoke arbitration, Ampler answered the plaintiff’s complaint in January 2022. Normally, answering a complaint without expressly seeking to enforce one’s right to arbitration is an act inconsistent with the right to arbitrate. Ampler’s answer to the plaintiff’s complaint, therefore, could be construed as a waiver of any contractual right to arbitrate. However, it is fair to say that Ampler "preserved" its right to later assert arbitration with its formulaic answer that it may have an affirmative defense to the plaintiff’s claims in the form of arbitration. See W. Va. R. Civ. Pro. Rule 8(c).
The problem is that, despite saying it had a right to arbitration in its answer, Ampler’s actions over the next eleven months of 2022 said the complete opposite. To begin, on February 9th, Ampler answered the plaintiff’s discovery which consisted of 24 multi-part interrogatories and 43 requests for documents. As part of this discovery, Ampler produced the arbitration agreement it now seeks to enforce. Eight-and-a-half months later, Ampler supplemented its answers and responses. Such detailed, expensive discovery is often not available in arbitration proceedings. Regardless, spending time and money answering discovery in a circuit court with- out asserting a right to arbitration is an act inconsistent with the right to arbitration and, thus, is a waiver of that right.
Thereafter, the waivers compounded. On February 22nd, Ampler served its own detailed discovery requests for information and documents on the plaintiff, discovery requests not generally available in arbitration. The plaintiff responded to Ampler's discovery requests on April 8th, providing information not available in arbitration. The plaintiff later supplemented her responses. Again, seeking and receiving civil discovery are activities contrary to the speedy processes available in arbitration; both the plaintiff's actions and Ampler’s actions show a willful abandonment of the arbitration process, or, in a simpler word, waiver.
And the record goes on and on. In March, the plaintiff’s lawyers and Ampler's lawyers continued to negotiate and exchange letters over whether "Ampler Burgers Ohio LLC" was the correct name of the party. In April, the plaintiff proposed an order substituting Ampler as the correct name of the defendant; Ampler responded with nine substantive edits to the proposed order. In June, Ampler’s lawyer declared he wanted to go back to the proposed order and "finish negotiating those terms." It took until August 31st for the circuit court to enter a substitution order that met with Ampler’s approval. On June 23rd, Ampler participated in a scheduling conference with the other parties and the circuit court, and on July 22nd, Ampler drafted and proposed a scheduling order for the circuit court’s signature. Ampler assembled and disclosed its list of fact witnesses on September 15th and accepted service of plaintiff’s list of fact witnesses. All of these actions by Ampler are in direct contradiction with its supposed right to arbitrate.
Finally, and quite importantly, the plaintiff sent interrogatories and document discovery to Ampler’s management employees at the Burger King restaurant (employees who were also sued as defendants). On their behalf, Ampler answered that discovery but allegedly did so in a superficial manner, as the plaintiff’s lawyers felt impelled to write an eight-page, single-spaced letter seeking clarification of Ampler’s answers. Ampler did not ignore the plaintiff’s letter and assert arbitration, but rather it replied that it would not provide detailed discovery responses until the plaintiff procured confidential, protected depositions from a separate lawsuit (by a minor plaintiff who sued the prior owner of the same Burger King for abuse and sexual harassment similar to that asserted against Ampler). See Yoxtheimer v. RMS Inc., Civil Action No. 20-C-41 (Kanawha County, 2020). Again, not to sound like a broken record, but these kinds of confidential, sealed depositions and exhibits are not materials typically obtainable without great difficulty in a circuit court case; Ampler and the plaintiff had to jointly ask the circuit court to enter a protective order allowing this information to be exchanged. These materials are not obtainable in an arbitration proceeding. Then, on November 1st, Ampler obtained 1,271 pages of deposition transcripts and 635 pages of exhibits, all of which were marked as confidential and include highly prejudicial, inflammatory testimony by Ampler’s management employees. These materials were not available to Ampler’s lawyers because the defendant in the separate lawsuit was represented by different counsel.
Seven days after receiving these reams of normally undiscoverable, confidential information, and some 400 days after the plaintiff filed her complaint, Ampler filed the motion to compel arbitration that is at the heart of this case.
Accordingly, it was quite a stretch for the majority opinion to say that the litigation process had "barely begun" when the motion to was filed. Whether the litigation process has barely begun, or jury selection is almost complete, once a party acts contrary to his/ her/its right to arbitration, then the right is waived.
This is why I dissent. Ampler made a proforma statement about the affirmative defense of arbitration in its answer, but it never formally tried to preserve its right to arbitration with a motion to compel. Instead, for the better part of a year, Ampler acted directly contrary to its contractual right to arbitration. Furthermore, in that time, Ampler procured piles of information that it might never have obtained in the arbitration process. And, in the end, the majority opinion blames the plaintiff for making "a conscious effort to obtain the benefits of discovery[.]" As I noted earlier, waiver is unilateral and "results as a legal consequence from some act or conduct of the party against whom it operates; no act of the party in whose favor it is made is necessary to complete it." Parsons, 237 W. Va. at 144, 785 S.E.2d at 850. Of course, the plaintiff plainly waived her right to arbitration the moment she filed her complaint; but, contrary to the majority opinion, she had no legal obligation to preserve the defendants’ rights. Knowing its rights, Ampler's conduct to the contrary triggered the doctrine of waiver, and nothing the plaintiff did was necessary to make that waiver complete.
The majority opinion’s adoption of a special test for Ampler, citing factors and guidelines special for arbitration claims, certainly helped Ampler even if it violated tests established in Parsons and Morgan. Problematically, I reiterate that when the majority opinion creeps up in future cases, these inexact, ad hoc, variable factors will impose delay, uncertainty, and costs on litigants and on the judicial system. That uncertainty and cost obliterates the reason for incorporating an arbitration provision into a contract.
Accordingly, I would suggest that this Court, in the future, adopt a clear, bright-line rule to more sharply define the circumstances under which a party waives its contractual right to arbitration when it participates in litigation. I believe such a rule is simple: A party that files or answers a civil complaint without asserting a contractual right to arbitration has waived the right.4b
A bright-line rule serves the policy goals of both federal and state arbitration law, namely speed, simplicity, and low cost. More importantly, the parties’ interests in efficient dispute resolution are better served by a clear rule, specifically one that requires the parties to choose their forum at the pleading stage of their dispute. A clear rule discourages parties from engaging in bad faith delay or "forum-seeking" behavior. Under the approaches employed by the majority opinion, litigants can jump between courtroom and arbitration forums before settling on the more "favorable" one, all the while arguing that there has been no "significant" or "substantial" or "fundamental" action that "prejudiced" the opposing side. Allowing a party to participate in "some" litigation before the opposing side is sufficiently prejudiced to constitute waiver essentially encourages parties to dawdle in court without losing the right to later arbitrate. For instance, as in the current case, a party might see what judge is assigned, or might induce a party to reveal their litigation or discovery strategy, before invoking arbitration. A party might rely upon discovery tools available in court but not in arbitration. Or a party may invoke arbitration only after seeing litigation going in the wrong direction, or after receiving an unfavorable ruling.
Adopting a bright-line rule encourages parties to seek either courtroom litigation or an arbitration forum, not both. Forcing parties to choose their forum at the pleading stage encourages efficient resolution of disputes and effectuates the purpose of both federal and state arbitration laws. By making a clear statement as to when the right to arbitration should be pled, this Court could eliminate uncertainty that will plague future litigation.
Accordingly, I respectfully dissent from the majority’s opinion. I am authorized to state that Justice Wooton joins in this dissent.