Dan Ryan Builders, Inc. v. Nelson
230 W. Va. 281
| W. Va. | 2012Background
- Fourth Circuit certified a question on contract formation and unconscionability regarding an arbitration provision in a multi-clause contract.
- Arbitration clause required Nelsons to arbitrate all claims, but DRB could pursue some claims in court.
- District court voided arbitration due to lack of mutuality of consideration.
- FAA §2 applies with a “savings clause” allowing state-law contract principles to govern validity/enforceability.
- Nelsons sued DRB for construction defects; DRB sought to compel arbitration; issues framed around mutuality and unconscionability.
- WV Supreme Court answers the certified question, holding contract as a whole needs adequate consideration; arbitration clause need not have separate consideration; unconscionability may consider lack of mutuality.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether WV law requires mutual consideration for a single arbitration clause in a multi-clause contract | Nelsons: each clause must have mutuality | DRB: entire contract suffices with adequate consideration | No separate consideration required for individual clause |
| Whether mutuality of obligation is relevant to unconscionability analysis | Nelsons: lack of mutuality supports unconscionability | DRB: unconscionability can consider overall fairness | Mutuality may be considered to assess substantive unconscionability |
| Role of FAA savings clause versus state contract formation rules | FAA preempts state-law to the extent it disfavors arbitration | State-law formation governs contract validity; FAA enforces terms | State contract formation governs; FAA preserves general contract principles under the savings clause |
| Precedent on unilateral arbitration clauses and unconscionability | Prior cases support rule against unilateral clauses | Flexible, contextual assessment permitted | Unconscionability may validate or void clauses lacking mutuality depending on circumstances |
Key Cases Cited
- First Nat. Bank of Gallipolis v. Marietta Mfg. Co., 151 W. Va. 636 (W.Va. 1967) (essential element: consideration; mutuality not required per se)
- Brown v. Genesis Healthcare Corp., 228 W. Va. 646 (W.Va. 2011) (FAA savings clause; arbitration enforceable like other contracts)
- Brown v. Genesis Healthcare Corp., 229 W. Va. 382 (W.Va. 2012) (Brown II; unconscionability factors; mutuality relevant to substantive unconscionability)
- Arnold v. United Companies Lending Corp., 204 W. Va. 229 (W.Va. 1998) (arbitration unconscionable where not reciprocal; per se rule limited by FAA)
- Saylor v. Wilkes, 216 W. Va. 766 (W.Va. 2005) (stand-alone arbitration contract insufficient; entire agreement must be considered)