Blackrock Capital Investment Corp. v. Jerry Fish
239 W. Va. 89
| W. Va. | 2017Background
- In 2006 Tremont and Blackrock formed AL Solutions to buy and operate a hazardous metal‑processing plant; board and officers were dominated by Tremont/Blackrock principals.
- That same day AL executed three management agreements with Tremont and Blackrock giving them broad "certain services" rights for fees; the services were undefined.
- Each agreement contained (1) a sweeping indemnification clause requiring AL Solutions to indemnify the management parties for "any and all" losses and defense costs and (2) a "no liability" clause disclaiming any liability of the management parties to AL Solutions.
- After recurring fires, a 2010 explosion killed three employees; victims sued AL Solutions, Tremont, and Blackrock. AL Solutions cross‑claimed and moved for declaratory judgment that the two clauses were unconscionable and unenforceable.
- The Hancock County circuit court granted partial summary judgment finding the clauses procedurally and substantively unconscionable; Blackrock appealed arguing (a) New York choice‑of‑law should apply and uphold the clauses, and (b) it was denied due process by curtailed briefing time.
Issues
| Issue | Plaintiff's Argument (AL Solutions) | Defendant's Argument (Blackrock) | Held |
|---|---|---|---|
| Choice of law for unconscionability analysis | West Virginia law applies (forum) and supports unconscionability | Management agreements specify New York law; court should apply New York law | Court agreed choice‑of‑law provision should govern but applied New York law and reached same result (clauses unconscionable) |
| Procedural unconscionability (formation process) | Clauses were imposed without meaningful choice: no independent counsel for AL, board composed of parent principals, president signed for both sides | Arm’s‑length corporate practice; parent/subsidiary common officers are typical and do not alone render contracts unconscionable | Held procedurally unconscionable: domination of AL’s formation/approval process and lack of independent representation defeated meaningful choice |
| Substantive unconscionability (terms) | Clauses are one‑sided: undefined services, management immune from liability, indemnity/defense obligations unilateral and bar AL’s remedies | Parties may contractually limit liability; such clauses are common and enforceable under contract law | Held substantively unconscionable: clauses unreasonably favored management, lacked mutuality, and could insulate management from performing or being liable |
| Due process / opportunity to be heard | Briefing and evidentiary opportunities were curtailed by the circuit court’s changed deadlines, denying Blackrock meaningful chance to respond | Blackrock had ample time overall; co‑defendant Tremont filed full responses and record was extensive; Blackrock failed to specify critical missing evidence | Held no denial of due process: record was developed, Blackrock had opportunity and failed to proffer material evidence; summary judgment affirmed |
Key Cases Cited
- Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1 (1988) (articulates New York doctrine of unconscionability and the sliding‑scale test between procedural and substantive elements)
- Mandel v. Liebman, 303 N.Y. 88 (1951) (definition of unconscionable bargains as those no sensible person would make or accept)
- Wilson Trading Corp. v. David Ferguson, Ltd., 23 N.Y.2d 398 (1968) (no‑damage/exculpatory clauses construed strictly against party seeking exemption)
- Anadarko Petroleum Corp. v. Panhandle E. Corp., 545 A.2d 1171 (Del. 1988) (discussion of parent/subsidiary corporate duties; cited by defendant for parent‑subsidiary norms)
- Manville Pers. Injury Settlement Tr. v. Blankenship, 231 W.Va. 637 (2013) (West Virginia precedent on unconscionability and equitable relief)