Wayne and Joyce Kirby v. Lion Enterprises, Inc.
756 S.E.2d 493
W. Va.2014Background
- Petitioners Wayne and Joyce Kirby contracted with Bastían Homes in 2009 to build a house; the written construction contract included a multi-part arbitration clause requiring a three-member panel of residential-contractor arbitrators and specifying venue, AAA rules, escrow of disputed sums, and fee-shifting to the losing party.
- Bastían Homes subcontracted plumbing to Dwire Plumbing; construction suffered a water leak and delay, and the Kirbys sued Bastían Homes and Dwire for negligence in 2012.
- Bastían moved to dismiss and compel arbitration based on the contract clause; the circuit court granted the motion, finding the clause was "bargained for," "fairly negotiated," and not unconscionable.
- The Kirbys appealed, arguing the arbitration clause was not bargained for, was unconscionable (procedurally and substantively), and that their claims fell outside the clause.
- The Supreme Court of West Virginia affirmed in part, reversed in part, and remanded: it held Harley Miller II’s "bargained-for" requirement is superseded by Dan Ryan (no separate consideration needed for an arbitration clause if the entire contract has consideration), but remanded to develop the factual record on unconscionability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/mutuality of arbitration clause ("bargained for") | Kirbys: arbitration clause not separately bargained for; invalid. | Bastían: whole contract has consideration so arbitration clause is enforceable. | Court: Under Dan Ryan, only consideration for entire contract is required; arbitration clause need not be separately "bargained for." Arbitration enforceable on that ground. |
| Scope—do Kirbys' claims fall within arbitration clause | Kirbys: negligence claims against subcontractor/joint liability fall outside clause. | Bastían: claims "pertain to the terms of this Agreement" and are arbitrable. | Court: Kirbys' claims against Bastían arise from the construction contract and are within the arbitration clause. |
| Unconscionability—procedural & substantive | Kirbys: clause may be adhesive, imposed, and contain one-sided terms (venue, arbitrator selection, escrow, fee-shifting). | Bastían: clause was negotiated and not unconscionable; circuit court found no evidence of unconscionability. | Court: Trial court decided unconscionability without developed record; reversed and remanded for factual development on procedural and substantive unconscionability. |
| Application of federal law/FAA preemption and severability | Kirbys: state contract defenses apply to invalidate clause. | Bastían: FAA governs; courts should enforce clauses absent general contract defenses. | Court: FAA applies (interstate commerce), state contract-law defenses (e.g., unconscionability) remain available; severability principles apply but factual record needed before deciding enforceability. |
Key Cases Cited
- Board of Education v. W. Harley Miller, Inc., 160 W.Va. 473, 236 S.E.2d 439 (W. Va. 1977) (historic West Virginia rule requiring arbitration provision be "bargained for").
- Dan Ryan Builders, Inc. v. Nelson, 230 W.Va. 281, 737 S.E.2d 550 (W. Va. 2012) (contract formation requires consideration for the entire contract, not each clause).
- State ex rel. Richmond American Homes of W. Va., Inc. v. Sanders, 228 W.Va. 125, 717 S.E.2d 909 (W. Va. 2011) (discussing FAA interplay with state contract doctrines and unconscionability analysis).
- Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (W. Va. 2011) (procedural and substantive unconscionability framework; sliding scale analysis).
- Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (U.S. 1995) (FAA preserves state contract defenses but forbids singling out arbitration clauses for disfavored treatment).