Recently, the West Virginia Supreme Court affirmed that two homeowners could not sue the construction companies that built their house for negligence due to an existing arbitration clause in their contract.
Back in March 2009, Wayne and Joyce Kirby entered into a written agreement with Bastian Homes to have a new house constructed in Fairmont. This agreement included an arbitration clause. Bastian Homes then subcontracted with Ed Dwire of Dwire Plumbing to provide plumbing services to the house. However, before construction was completed, there was a water leak that allegedly caused damage to significant portions, resulting in a delay lasting as long as 10 months. The Kirbys then sued Bastian Homes and Dwire Plumbing jointly for negligence, and Bastian Homes moved to dismiss the complaint due to the arbitration clause, which required either party to submit the matter to arbitration rather than file in court. The Kirbys responded that because the arbitration clause was never “bargained for,” it was invalid. Wayne Kirby noted that he had objected to the clause at the time of contract, but was told not to worry because Bastian Homes was bonded, and that the company would correct or repair any defects in workmanship if they were discovered within a year of construction.
Despite this, the trial court judge found that the Kirbys still needed to go through the arbitration process and the West Virginia Supreme Court affirmed. The Court considered the respective bargaining positions of the Kirbys and Bastian Homes, and also the contract itself. The Court noted that as long as the contract as a whole was supported by an offer, acceptance, and sufficient consideration, the entire contract was valid and it did not matter if the arbitration clause was not independently bargained for. Since there was valid offer, acceptance, and consideration, the contract between the Kirbys and Bastian Homes was valid.
The only way the Court could invalidate the arbitration clause was if it found a case of “unconscionability” – that the parties’ bargaining positions were so unequal, the contract had to be nullified. The Court noted that the circuit court had failed to do a proper analysis of unconscionability, and therefore the case should be remanded to trial court to be weighed and decided on that issue. Therefore, while the Court affirmed the lower court’s ruling on “bargained for,” it disagreed that the lower court had properly considered every aspect of the case.
Arbitration clauses have been becoming more popular over the past decade or so, finding their way into contracts ranging from employment to consumer products to even nursing home care. Companies appear to favor them due to the fact that arbitration is (generally, not always) cheaper than court litigation. It also does not hurt that many companies specify certain arbitration companies in their contracts, and those arbitrators naturally favor the companies that pay them. Even though the United States Supreme Court had been very strict about the Federal Arbitration Act overriding the law of individual states concerning arbitration clauses, state courts have managed to find a loophole through the determination of whether a case of “unconscionability” — grossly unequal bargaining power or unfair surprise — existed at the time of contract negotiations.
The Wolfe Law Firm has been providing legal services for nearly 25 years. Located in Elkins, West Virginia, the firm provides services in the areas of personal injury, criminal defense, bankruptcy, and mediation. If you are looking for an experienced West Virginia personal injury attorney, contact us today.