Schumacher Homes of Circleville v. John and Carolyn Spencer
774 S.E.2d 1
W. Va.2015Background
- Spencers entered into a West Virginia construction contract with Schumacher containing an arbitration clause and a delegation provision.
- Delegation provision states: 'The arbitrator(s) shall determine all issues regarding the arbitrability of the dispute.'
- Schumacher moved to compel arbitration; circuit court denied due to unconscionability of the arbitration clause as a whole.
- Schumacher argued the delegation provision required the arbitrator to decide arbitrability; the circuit court did not address it.
- Court analyzes FAA doctrine, severability, and whether delegation provision is clear and unmistakable and enforceable under state contract law.
- Court affirms circuit court’s ruling that the arbitration clause is unenforceable; dissent argues delegation provision was clear and enforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the delegation provision clearly and unmistakably delegates arbitrability questions to the arbitrator. | Spencers argue delegation is clear; arbitrator decides arbitrability under FAA. | Schumacher argues delegation is clearly intended to empower arbitrator on enforceability questions. | Delegation provision not clearly and unmistakably so; not enforceable. |
| Whether severability limits court review to the arbitration clause after delegation, or to the contract as a whole. | Arbitration clause should be severed and reviewed for enforceability. | FAA severability allows referral to arbitrator for validity; court should not weigh unconscionability. | Severability applies; however, delegation provision must be clear and uncontested to bind arbitrator. |
| Whether the circuit court properly handled the delegation provision given it was not raised in initial motion to compel arbitration. | Delegation provision was not properly raised; may be waived. | Later argument on delegation was proper and should have been considered. | The delegation issue was not properly raised; still not enforceable here. |
| Whether applicable contract defenses allow invalidation of the delegation provision or the arbitration clause. | Contract defenses (unconscionability) apply to invalidate the clause as a whole. | Unconscionability defenses apply to the clause; delegation provision may survive if clear. | Unconscionability findings supported; arbitration clause unenforceable under state law. |
| Whether the contract’s choice-of-law provision and related Ohio law considerations affect the analysis of unconscionability. | Choice of law (Ohio) governs contract interpretation including unconscionability. | WV law governs unconscionability; defense to arbitration aligns with WV standards. | WV substantive law applied; Ohio law considerations acknowledged but not controlling. |
Key Cases Cited
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (Supreme Court 2010) (delegation provision is a mini-arbitration agreement; must challenge it specifically)
- Brown v. Genesis Healthcare Corp., 228 W.Va. 646 (WV Supreme Court 2011) (severability and FAA integration; contract-law review of arbitration clause)
- Marmet Health Care Center, Inc. v. Brown, 132 S. Ct. 1201 (U.S. Supreme Court 2012) (reaffirmed liberal policy favoring arbitration under FAA)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (Supreme Court 2006) (arbitration clause severable from the contract; challenges to contract go to arbitrator)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Supreme Court 1995) (clear and unmistakable evidence standard for arbitrability)
- Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Supreme Court 1983) (liberal federal policy favoring arbitration; threshold scope questions)