793 S.E.2d 879
W. Va.2016Background
- Five former nursing students sued Salem International University in a putative class action alleging loss of opportunity to complete nursing program after accreditation loss and asserting consumer-protection, negligence, breach of contract, and related claims.
- Each student signed an enrollment agreement containing an arbitration clause providing for "individual binding arbitration," prohibiting joinder/consolidation, and stating the arbitrator "shall have no authority to arbitrate claims on a class action basis."
- Salem moved to stay and compel arbitration under the AAA rules; plaintiffs opposed, arguing the arbitration clause was invalid, exempted class claims from arbitration, and was unconscionable.
- The circuit court denied Salem’s motion, finding the clause ambiguous regarding a class-action waiver and construing ambiguity against Salem as drafter.
- West Virginia Supreme Court accepted interlocutory appeal, limited review to whether the arbitration agreement contains an enforceable class-action waiver (declining to reach broader validity/unconscionability challenges).
- The Court reversed the circuit court, holding the clause unambiguously waives class relief and ordering the case remanded to compel individual arbitration or stay proceedings pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the arbitration clause contain an enforceable class-action waiver? | Clause is ambiguous or contradictory; does not clearly and unmistakably waive class rights; any ambiguity should be construed against drafter (Salem). | Clause requires "individual" arbitration, forbids joinder/consolidation, and states arbitrator has no authority to hear class claims — together they unambiguously waive class actions. | Waiver is clear: clause unambiguously bars class-action litigation and requires individual arbitration. |
| Whether the court should resolve scope of arbitration before class-certification? | Plaintiffs argued order not ripe because class certification pending—if denied, individual claims remain. | Salem argued immediate appeal proper; FAA and precedent apply to determine arbitrability now. | Court rejected ripeness objection and resolved waiver issue on interlocutory appeal. |
| Whether federal law (FAA) governs interpretation and enforceability of the arbitration clause? | Plaintiffs relied on state contract principles to attack clause validity. | Salem invoked FAA and its presumption favoring arbitration. | FAA governs; courts apply federal policy favoring arbitration while using state contract law principles where appropriate. |
| Whether the appellate court will consider broader challenges to arbitration clause validity (e.g., unconscionability) when not cross-assigned properly? | Plaintiffs raised unconscionability and other attacks on validity in briefs/argument. | Salem emphasized record and limited issue; respondents did not cross-assign error to contest trial court’s implicit finding of overall validity. | Court refused to consider broader validity/unconscionability arguments not properly cross-assigned on appeal; review limited to class-waiver issue. |
Key Cases Cited
- Brown ex rel. Brown v. Genesis Healthcare, 228 W. Va. 646 (W. Va. 2011) (parties bound only to arbitrate issues they clearly and unmistakably agreed to arbitrate)
- State ex rel. City Holding Co. v. Kaufman, 216 W. Va. 594 (W. Va. 2004) (federal policy favoring arbitration requires liberal construction of arbitration clauses)
- Local Division No. 812 v. Transit Authority, 179 W. Va. 31 (W. Va. 1987) (presumption favoring arbitration; doubts resolved for arbitration)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (Supreme Court upholding enforceability of class-action waivers in arbitration clauses under the FAA)