Case Information
*1 IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA September 2013 Term FILED No. 12-1371 November 6, 2013 released at 3:00 p.m. RORY L. PERRY II, CLERK SUPREME COURT OF APPEALS CARA NEW, OF WEST VIRGINIA Plaintiff Below, Petitioner v.
GAMESTOP, INC. d/b/a GAMESTOP; AARON DINGESS, Individually; and DAVID TREVATHAN, Individually; Defendants Below, Respondents Appeal from the Circuit Court of Logan County
Honorable Roger L. Perry Civil Action No. 11-C-190 AFFIRMED Submitted: September 24, 2013 Filed: November 6, 2013 Richard W. Walters, Esq. Allyson N. Ho, PHV Brian L. Ooten, Esq. Craig A. Stanfield, PHV Shaffer & Shaffer, PLLC Morgan, Lewis & Bockius, LLP Madison, West Virginia Houston, Texas Attorneys for Petitioner Sam S. Shaulson, PHV
Morgan, Lewis & Bockius, LLP New York, New York Joseph M. Price, Esq. Benjamin W. Price, Esq. Robinson & McElwee PLLC Attorneys for Respondents
The Opinion of the Court was delivered PER CURIAM.
SYLLABUS BY THE COURT
1.
“Appellate review of a circuit court’s order granting a motion to dismiss
a complaint is
de novo
.” Syl. Pt. 2,
State ex rel. McGraw v. Scott Runyon Pontiac-Buick,
Inc.
,
2.
“‘When a trial court is required to rule upon a motion to compel
arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-307 (2006), the authority
of the trial court is limited to determining the threshold issues of (1) whether a valid
arbitration agreement exists between the parties; and (2) whether the claims averred by the
plaintiff fall within the substantive scope of that arbitration agreement.’ Syllabus Point 2,
State ex rel. TD Ameritrade, Inc. v. Kaufman,
3. “‘Under the Federal Arbitration Act, 9 U.S.C. § 2, a written provision to settle by arbitration a controversy arising out of a contract that evidences a transаction affecting interstate commerce is valid, irrevocable, and enforceable, unless the provision is found to be invalid, revocable or unenforceable upon a ground that exists at law or in equity for the revocation of any contract.’ Syllabus Point 6, Brown v. Genesis Healthcare Corp .,
i
4.
“‘Nothing in the Federal Arbitration Act, 9 U.S.C. § 2, overrides normal
rules of contract interpretation. Generally applicable contract defenses–such as laches,
estoppel, waiver, fraud, duress, or unconscionability–may be applied to invalidate an
arbitration agreement.’ Syllabus Point 9,
Brown v. Genesis Healthcare Corp
., 228 W.Va.
646,
5.
“‘A valid written instrument which expresses the intent of the parties
in plain and unambiguous language is not subject to judicial construction or interpretation
but will be applied and enforced according to such intent.’
Cotiga Development Co. v. United
Fuel Gas Co.
,
6. “‘The doctrine of unconscionability means that, because of an overall and gross imbalance, one-sidedness or lop-sidedness in a contract, a сourt may be justified
ii
in refusing to enforce the contract as written. The concept of unconscionability must be
applied in a flexible manner, taking into consideration all of the facts and circumstances of
a particular case.’ Syllabus Point 12,
Brown v. Genesis Healthcare Corp
.,
7.
“‘A determination of unconscionablity must focus on the relative
positions of the parties, the adequacy of the bargaining position, the meaningful alternatives
available to the plaintiff, and the “existence of unfair terms in the contract.”’ Syllabus Point
4,
Art’s Flower Shop, Inc. v. Chesapeake and Potomac Telephone Co. of West Virginia, Inc.
,
8.
“‘A contract term is unenforceable if it is both procedurally and
substantively unconscionable. However, both need not be present to the same degree.
Courts should apply a ‘sliding scale’ in making this determination: the more substantively
oppressive the contract term, the less evidence of procedural unconscionability is required
to come to the conclusion that the clause is unеnforceable, and vice versa.’ Syllabus Point
20,
Brown v. Genesis Healthcare Corp.
,
iii
in part on other grounds by Marmet Health Care Center, Inc. v. Brown
, U.S. , 132 S.Ct.
1201,
9.
“‘Procedural unconscionability
is concerned with
inequities,
improprieties, or unfairness in the bargaining process and formation of the contract.
Procedural unconscionability involves a variety of inadequacies that results in the lack of a
real and voluntary meeting of the minds of the parties, considering all the circumstances
surrounding the transaction. These inadequacies include, but are not limited to, the age,
literacy, or lack of sophistication of a party; hidden or unduly complex contract terms; the
adhesive nature of the contract; and the manner and setting in which the contract was formed,
including whether each party had a reasonable opportunity to understand the terms of the
contract.’ Syllabus Point 17,
Brown v. Genesis Healthcare Corp
.,
10. “‘A contract of adhesion is one drafted and imposed by a party of superior strength that leaves the subscribing party little or no opportunity to alter the substantive terms, and only the opportunity to adhere to the contract or reject it. A contract
iv
of adhesion should receive greater scrutiny than a contract with bargained-for terms to
determine if it imposes terms that are oppressive, unconscionable or beyond the reasonable
expectations of an ordinary person.’ Syl. Pt. 18,
Brown v. Genesis Healthcare Corp
., 228
W.Va. 646,
11.
“‘Substantive unconscionability involves unfairness in the contract itself
and whether a contract term is one-sided and will have an overly harsh effect on the
disadvantaged party. The factors to be weighed in assessing substantive unconscionability
vary with the content of the agreement. Generally, courts should consider the commercial
reasonableness of the contract terms, the purpose and effect of the terms, the allocation of
the risks between the parties, and public policy concerns.’ Syllabus Point 19,
Brown v.
Genesis Healthcare Corp
.,
12. “In assessing whether a contract provision is substantively unconscionable, a court may consider whether the provision lacks mutuality of obligation.
v
If a provision creates a disparity in the rights of the contracting parties such that it is one-
sided and unreasonably favorable to one party, then a court may find the provision is
substantively unconscionable.” Syl. Pt. 10,
Dan Ryan Builders, Inc. v. Nelson
, 230 W.Va.
281,
vi
Per curiam:
The petitioner, Cara New, appeals the October 10, 2012, order of the Circuit Court of Logan County, which granted the motions to dismiss of the respondents, GameStop, Inc., Aaron Dingess, and David Traevathan (collectively referred to as “GameStop”), pending the petitioner’s submission of her claims to final and binding arbitration. On appeal, the petitioner argues that she did not enter into a valid arbitration agreement with GameStop. Nonetheless, she argues that even if this Court determines that a valid arbitration agreement exists, the agreement is still unconscionable and unenforceable. We find no error and, accordingly, affirm the circuit court’s order.
I. Factual and Procedural Background
GameStop operates retail stores that sell new and used video games and video gaming hardwarе. On March 29, 2009, GameStop hired the petitioner as an assistant manager at its store in Logan County, West Virginia. When the petitioner began her employment with GameStop, she received a “Store Associate Handbook” (“the Handbook”), which summarized the company’s policies, procedures, and practices. The Handbook further provided that the petitioner did
not have, nor does this Handbook constitute, an employment contract, express or implied. Your employment is not confined to a fixed term and may be ended by either you or GameStop, Inc. at any time and for any reason. All terms and conditions of *9 employment are subject to change without notice, other than GameStop C.A.R.E.S. Rules for Dispute Resolution. [1]
(Footnote added).
Set forth in a separate, fourteen-page document included with, but set off from, the forty-page Handbook, is the arbitration agreement at issue in this case. This agreement, entitled the “GameStop C.A.R.E.S. [2] Rules of Dispute Resolution Including Arbitration” (“the GameStop C.A.R.E.S. Rules,” “the GameStop C.A.R.E.S. program,” or “the arbitration agreement”), is a multi-step intеrnal dispute resolution program that includes binding arbitration. Among other things, the document states that the GameStop C.A.R.E.S. Rules
are a mutual agreement to arbitrate Covered Claims (as defined below). The Company and you agree that the procedures provided in these Rules will be the sole method used to resolve any Covered Claim as of the Effective Date of the Rules, regardless of when the dispute or claim arose. The Company and you agree to accept an arbitrator’s award as the final, binding and exclusive determination of all Covered Claims. These Rules do not preclude any employee from filing a charge with a state, local or federal administrative agency such as the Equal Employment Opportunity Commission.
*10 GameStop C.A.R.E.S. is an agreement to arbitrate pursuant to the Federal Arbitration Act, 9 U.S.C. Sections 1-14, or if that Act is held to be inapplicable for any reason, the arbitration law in the state of Texas will apply. The parties acknowledge that the Company is engaged in transactions involving interstate commerce.
. . . .
If any court of competent jurisdiction declares that any part of GameStop C.A.R.E.S., including these Rules, is invalid, illegal or unenforceable (other than as noted for the class action, collective action and representative action waiver above), such declaration will not effect [sic] the legality, validity or enforceability of the remaining parts, and each provision of GameStop C.A.R.E.S. will be valid, legal and enforceable to the fullest extent permitted by law.
Nothing in these Rules changes or in any way modifies the parties’ employment relationship of employment-at-will; that is, the parties can each end the relationship at any time for any reason with or without cause. The Arbitrator has no authority to alter the at-will nature of your employment.
. . . .
GameStop may from time to time modify or discontinue GameStop C.A.R.E.S. by giving covered employees thirty (30) calendar days notice; however, any such modification or rescission shall be applied prospectively only. An employee shall complete the processing of any dispute pending in GameStop C.A.R.E.S. at the time of an announced change, under the terms of the procedure as it existed when the dispute was initially submitted to GameStop C.A.R.E.S.
Upon being hired by GameStop, the petitioner signed and dated an “Acknowledgment and Receipt of the Store Associate Handbook and GameStop C.A.R.E.S. Rules Including Arbitration” (“the Acknowledgment”). The signed Acknowledgment was *11 on a separate page. In this Acknowledgement, the petitioner specifically agreed that all workplace disputes or claims could not be taken to court, but must, instead, be resolved through the dispute resolution and arbitration system set out in the GameStop C.A.R.E.S. Rules. It stated as follows:
I acknowledge that I have received a copy of the GameStop Store Associate Handbook, including the GameStop C.A.R.E.S. Rules for Dispute Resolution. The Rules set forth GameStop’s procedure for resolving workplace disputes ending in final and binding arbitration. The Handbook summarizes certain information about my job and company policies, procedures and practices. I understand that it is my responsibility to read and familiarize myself with the information contained in the Handbook. I understand that by continuing my employment with GameStop following the effective date of GameStop C.A.R.E.S., I am agreeing that all workplace disputes or claims, regardless of when those disputes or claims arose, will be resolved under the GameStop C.A.R.E.S. program rather than in court. This includes legal and statutory claims, and class or collective action claims in which I might be included. I understand that at any time and for any reason, GameStop may make changes to the Handbook, except for the Rules, without prior notice. I understand that my employment with GameStop is “at will,” and that either I or GameStop may end my employment at any time and for any reason.
On September 9, 2011, the petitioner filed a Complaint against GameStop in the Circuit Court of Logan County, alleging wrongful discharge, sexual harassment, hostile work environment, intentional infliction of emotional distress, negligent infliction of emotional distress, and violations of the West Virginia Wage Payment and Collection Act. Thе petitioner alleged that she had been sexually harassed by Respondent Aaron Dingess, the *12 store manager and her direct supervisor, and Respondent David Trevathan, a GameStop district manager who had supervisory authority over both Respondent Dingess and the petitioner. The petitioner further alleged that she was wrongfully demoted and discharged based upon her gender and/or in retaliation for reporting the misconduct of Respondent Dingess to Respondent Trevathan.
In response to the petitioner’s lawsuit, each of the respondents filed a separate “Motion to Dismiss Pending Mandatory Arbitration,” or, in the alternative, to stay the proceedings pending referral “to arbitration as is required by the GameStop C.A.R.E.S. program which [the petitioner] agreed through her continued employment GameStop would provide the exclusive means by which her claims in this matter would be resolved.”
By order entered October 10, 2012, the circuit court granted the respondents’ motions to dismiss. This appeal by the petitioner followed.
II. Standard of Review
The petitioner appeаls the circuit court’s order granting GameStop’s motion
to dismiss and compelling her to submit her claims to arbitration. “Appellate review of a
circuit court’s order granting a motion to dismiss a complaint is
de novo
.” Syl. Pt. 2,
State
ex rel. McGraw v. Scott Runyon Pontiac-Buick, Inc.
,
only after a de novo review of the circuit court’s legal determinations leads to the inescapable conclusion that the circuit court clearly erred, as a matter of law, in directing that a matter be arbitrated or that the circuit court’s order constitutes a clear-cut, legal error plainly in contravention of a clear statutory, constitutional, or common law mandate.
Syl. Pt. 4, McGraw v. American Tobacco Co. , 224 W.Va. 211, 214, 681 S.E.2d 96, 99 (2009). With these standards in mind, we proceed to consider the parties’ arguments.
III. Discussion
When reviewing a motion to compel arbitration under an arbitration agreement, a court’s consideration of the motion is limited to two issues: is the arbitration agreement valid, and does the agreement cover the plaintiff’s claims? As wе have explained,
When a trial court is required to rule upon a motion to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-307 (2006), the authority of the trial court is limited to determining the threshold issues of (1) whether a valid arbitration agreement exists between the parties; and (2) whether the claims averred by the plaintiff fall within the substantive scope of that arbitration agreement. Syllabus Point 2, State ex rel. TD Ameritrade, Inc. v. Kaufman , 225 W.Va. 250, 692 S.E.2d 293 (2010).
Syl. Pt. 5,
Brown v. Genesis Healthcare Corp.
,
A. Validity of arbitration agreement
The petitioner concedes that, if a valid arbitration agreement exists, her substantive claims would come within the scope of that agreement. She asserts, however, that the parties did not form a contract to arbitrate their disputes. Furthermore, she asserts that if a contract was formed, then the contract is unenforceable because it is unconscionable.
By its express terms, the GameStop C.A.R.E.S. program clearly advises its employees that it is an arbitration agreement. It provides that
GameStops C.A.R.E.S. is an agreement to arbitrate pursuant to the Federal Arbitration Act, 9 U.S.C. Sections 1-14, or if that Act is held to be inapplicable for any reason, the arbitration law in the state of Texas will apply. The parties acknowledge that the Company is engaged in transactions involving interstate commerce.
In syllabus point one of
State ex rel. Johnson Controls, Inc. v. Tucker
,
“Under the Federal Arbitration Act, 9 U.S.C. § 2, a
written provision to settle by arbitration a controversy arising
out of a contract that evidences a transaction affecting interstate
commerce is valid, irrevocable, and enforceable, unless the
provision is found to be invalid, revocable or unenforceable
upon a ground that exists at law or in equity for the revocation
of any contract.” Syllabus Point 6,
Brown v. Genesis Healthcare
*15
Corp.
,
In considering whether an arbitration agreement has been validly formed, normal rules of contract interpretation apply. In syllabus point two of Johnson Controls , we recognized:
“Nothing in the Federal Arbitration Act, 9 U.S.C. § 2, overrides normal rules of contract interpretation. Generally applicable contract defenses–such as laches, estoppel, waiver, fraud, duress, or unconscionability–may be applied to invalidate an arbitration agreement.” Syllabus Point 9, Brown v. Genesis Healthcare Corp ., 228 W.Va. 646, 724 S.E.2d 250 (2011) [subseq. History].
The petitioner does not dispute that she received a copy of the GameStop C.A.R.E.S. Rules which plainly state that it is an agreement to arbitrate under the F.A.A. More importantly, the petitioner does not dispute that the GameStop C.A.R.E.S. Rules evidence a transaction affecting interstate commerce such that it would be governed by the F.A.A. Likewise, she does not dispute that she signed the Acknowledgment of the mutual agreement to arbitrate, which indicated, inter alia , that she understood that “by continuing my employment with GameStop . . . I am agreeing that all workplace disputes or claims . . . will be resolved under the GameStop C.A.R.E.S. program rather than in court.” However, the petitioner challenges the arbitration agreement, arguing that the disclaimer in the Handbook that “[y]ou do not have, nor does this Handbook constitute, an employment *17 contract, express or implied” renders the arbitration agreement unenforceable. GameStop counters that a valid agreement to arbitrate was formed, as evidenced by the clear and unambiguous language set forth in the GameStop C.A.R.E.S. Rules and the Acknowledgment signed by the petitioner at the time of her employment.
The crux of the petitioner’s argument is that, given the disclaimer language in
the Handbook, no arbitration agreement was formed because there was no mutual assent or
meeting of the minds with respect to arbitration. West Virginia contract law requires mutual
assent to form a valid contract.
See Ways v. Imation Enterprises Corp.
,
In Patterson v. Tenet Health Care, Inc. , 113 F.3d 832 (8 th Cir. 1997), the Eighth Circuit Court of Appeals considered whether an arbitration provision set forth on the last page of the company’s handbook constituted a valid arbitration agreement. The handbook at issue included a disclaimer that it was “‘not intended to constitute a legal contract with any employee’” and that “‘no written statement or agreement in this handbook concerning employment is binding,’” while also providing that all disputes are to be resolved through binding arbitration. Id. at 834. Not unlike the case sub judice , the plaintiff employee in Patterson also signed an acknowledgment form which stated that there was no contract of employment and that “as a condition of employment and continued employment, I agree to submit any complaints to the published process and agree to abide by and accept the final decision of the arbitration panel as ultimate resolution of my complaint(s) for any and all *19 events that arise out of employment or termination of employment.” Id. at 834-35. The court in Patterson found the arbitration clause to be separate from the handbook provisions stating that the handbook is not a binding contract. More specifically, the court noted that the arbitration clause was set forth on a separate page of the handbook with a conspicuous heading: “ IMPORTANT! Acknowledgment Form. ” Id. at 835. The court was further persuaded by the arbitration clause’s use of “contractual terms such as ‘I understand,’ ‘I agree,’ I ‘agree to abide by and accept,’ ‘condition of employment,’ ‘final decision,’ and ‘ultimate resolution.’” Id. The court concluded that “the difference in language used in the handbook and that employed in the arbitration clause would sufficiently impart to an employee that the arbitration clause stands alone, separate and distinct from the rest of the handbook.” Id.
Similarly, in Curry v. MidAmerica Care Foundation. , 2002 WL 1821808 (S.D.Ind. 2002), the United States District Court for the Southern District of Indiana found that, notwithstanding the disclaimer that the employee “handbook is neither a contract of employment nor a legal document[,]” the language in the arbitration agreement included therein provided that the employee and employer “‘voluntarily promise, irrevocably agree, *20 understand, agree to abide by and to accept’ the conditions contained [therein] . . . .” [4] Id. at *2, 4. The court in Curry concluded that this language
conveys to an employee such as [the plaintiff employee] that the arbitration agreement is a separate and distinct part of the handbook and constitutes an agreement by the parties. Moreover, the arbitration agreement further conveys this . . . by expressly stating that ‘[t]his is the complete agreement of the parties on the subject of employment and arbitration of disputes and claims.’
Id. at *4. Indeed,
[a]ny doubt as to whether the arbitration agreement is separate from the rest of the employee handbook is resolved by [the additional] language . . . that “[the parties] understand that if any other provision of this manual is deemed to violate any local, state, or federal law or regulation, that this provision stands by itself and is fully enforceable to the fullest extent provided by law. ”
Id. The court in Curry concluded that mutual assent was present by virtue of the employer offering the arbitration agreement to the plaintiff as a condition of her employment and the plaintiff accepting the arbitration agreement by accepting employment. Id. at *5.
Likewise, in Brown v. KFC National Management Co. , 921 P.2d 146 (Haw.1996), the Supreme Court of Hawaii concluded that an arbitration agreement was valid and enforceable even though the “Agreement” section on the plaintiff employee’s *21 employment application clearly stated that his employment would be “at will” and “that the application was not an implied or express contract of employment.” Id . at 150. The court in Brown concluded that
[t]he arbitration agreement . . . is manifestly unambiguous in its expressed intent that employment-related disputes be arbitrated rather then resolved via resort to the federal or state court systems. Indeed, no other construction could be accorded the recitation that “[Employer] and [employee] agree to submit to binding arbitration any controversies concerning [the employee’s] compensation, employment[,] or termination of employment[.]”
Id.
at 159. The court in
Brown
accordingly determined that “on its face, [the arbitration
agreement] reflects both mutual assent to the arbitration of employment-related disputes and
consideration for that mutual assent.”
Id.
, at 160;
see also Lumuenemo v. Citigroup, Inc.
,
This Court adheres to the basic principle that “‘[a] valid written instrument
which expresses the intent of the parties in plain and unambiguous language is not subject
to judicial construction or interpretation but will be applied and enforced according to such
intent.’
Cotiga Development Co. v. United Fuel Gas Co.
,
In the case sub judice , we find that there was a clear and unequivocal intent by both parties to arbitrate. The GameStop C.A.R.E.S. Rules clearly state that it “is an agreement to arbitrate pursuant to the [FAA][;];” that it is “a mutual agreement to arbitrate Covered Claims[;]” and that both GameStop and the petitioner “agree that the procedures provided in these Rules will be the sole method used to resolve any Covered Claim . . . .” The Rules further provide that both GameStop and the petitioner “agree to accept an arbitrator’s award as the final, binding and exclusive determination of all Covered Claims.” The GameStop C.A.R.E.S. Rules were set apart from the forty-page Handbook and consisted of an additional, separately numbered, fourteen-page document.
Additionally, even a cursory review of the Handbook (such as by an employee
receiving it upon employment) reveals that it is merely informative of GameStop’s various
*23
practices, policies and procedures.
[5]
By comparison, the language in the GameStop
C.A.R.E.S. Rules is clearly more contractual in nature. This is demonstrated not only by the
language stating that “[t]hese Rules . . . govern” and “are a mutual agreement to arbitrate,”
“I acknowledge,” “I understand,” and “I am agreeing,” but also by the agreement’s provision
that “[i]f any court . . . declares that any part of GameStop C.A.R.E.S. . . . is invalid, illegal
or unenforceable . . . such declaration will not effect [sic] the legality, validity or
enforceability of the remaining parts, and each provision of GameStop C.A.R.E.S. will be
valid, legal and enforceable to the fullest extent permitted by law.”
See Patterson
, 113 F.3d
at 835;
Curry
,
Furthermore, the petitioner signed the separate Acknowledgment which
unequivocally states that the GameStop C.A.R.E.S. Rules “set forth GameStop’s procedure
for resolving workplace disputes ending in final and binding arbitration. . . . [and] I
understand that
by continuing my employment with GameStop . . . I am agreeing that all
workplace disputes or claims . . . will be resolved under the GameStop C.A.R.E.S. program
rather than in court.
” (emphasis added). GameStop offered the arbitration agreement to the
petitioner as a condition of her employment and the petitioner accepted the agreеment by
accepting employment. Clearly, notwithstanding the disclaimer that the Handbook did not
constitute a contract of employment, the parties entered into a separate agreement to arbitrate.
*24
“Viewed in context, the arbitration agreement highlights–rather than camouflages–its general
purpose and the limited scope of the disclaimer [i.e., to emphasize the employee’s at-will
employment status] is clear and unambiguous . . . .”
Brown
,
B. Unconscionability
The petitioner next argues that if it is determined that the parties entered into
аn agreement to arbitrate, as we have concluded, then it was an unconscionable contract of
adhesion and, therefore, unenforceable.
See Johnson Controls
,
The doctrine of unconscionability means that, because of an overall and gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified in refusing to enforce the arbitration policy was displayed in store, and policy was made available in store manual and on GameStop intranet; acceptance occurred when plaintiff signed Acknowledgment form–which plaintiff had duty to read–and GameStop’s actions of distributing and displaying information about C.A.R.E.S. process “would have put a reasonably prudent employee on notice of the agreement to arbitrate.”).
[7] Given our conclusion that the terms of the GameStop C.A.R.E.S. Rules and the Acknowledgment are clear and unambiguous as to the parties’ mutual intent to arbitrate, we need not address the petitioner’s argument that they were ambiguous by virtue of the disclaimer.
contract as written. The concept of unconscionability must be applied in a flexible manner, taking into consideration all of the facts and circumstances of a particular case. Syllabus Point 12, Brown v. Genesis Healthcare Corp. ,228 W.Va. 646 , 724 S.E.2d 250 (2011)[, overruled in part on other grounds , U.S. , 132 S.Ct. 1201,182 L.Ed.2d 42 (2012)].
Syl. Pt. 4,
Brown v. Genesis Healthcare Corp.
,
Our analysis of whether the arbitration agreement at issue is “‘unconscionable
necessarily involves an inquiry into the circumstances surrounding [its] execution and the
fairness of [it] as a whole.’”
Id.
at 385,
[a] determination of unconscionablity must focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and the “existence of unfair terms in the contract.” Syllabus Point 4, Art’s Flower Shop, Inc. v. Chesapeake and Potomac Telephone Co. of West Virginia, Inc. , 186 W.Va. 613, 413 S.E.2d 670 (1991).
*27
Brown II
,
There is a growing body of cаse law in West Virginia which has indicated that
this Court chooses to “analyze unconscionability in terms of two component parts: procedural
unconscionability and substantive unconscionability.”
Id.
at 392,
“[a] contract term is unenforceable if it is both
procedurally and substantively unconscionable. However, both
need not be present to the same degree. Courts should apply a
‘sliding scale’ in making this determination: the more
substantively oppressive the contract term, the less evidence of
procedural unconscionability is required to come to the
conclusion that the clause is unenforceable, and vice versa.”
Syllabus Point 20,
Brown v. Genesis Healthcare Corp.
, 228
W.Va. 646,
1. Procedural Unconscionability
With regard to procedural unconscionability, this Court has stated as follows: Procedural unconscionability is concerned with inequities, improprieties, or unfairnеss in the bargaining process and formation of the contract. Procedural unconscionability involves a variety of inadequacies that results in the lack of a real and voluntary meeting of the minds of the parties, considering all the circumstances surrounding the transaction. These inadequacies include, but are not limited to, the age, literacy, or lack of sophistication of a party; hidden or unduly complex contract terms; the adhesive nature of the contract; and the manner and setting in which the contract was formed, including whether each party had a reasonable opportunity to understand the terms of the contract.” Syllabus Point 17, Brown v. Genesis Healthcare Corp. ,228 W.Va. 646 ,724 S.E.2d 250 (2011)[, overruled in part on other grounds , U.S. , 132 S.Ct. 1201,182 L.Ed.2d 42 (2012)].
Brown II
,
This Court has recognized that it is not uncommon for procedural
unconscionability to begin with a contract of adhesion.
Brown II
,
A contract of adhesion is one drafted and imposed by a party of superior strength that leaves the subscribing party little or no opportunity to alter the substantive terms, and only the opportunity to adhere to the contract or reject it. A contract of adhesion should receive greater scrutiny than a contract with bargained-for terms to determine if it imposes terms that are oppressive, unconscionable or beyond the reasonable expectations of an ordinary person. Syl. Pt. 18, Brown v. Genesis Healthcare Corp. , 228 W.Va. 646, 724 S.E.2d 250 (2011)[, overruled in part on other grounds , U.S. , 132 S.Ct. 1201,182 L.Ed.2d 42 (2012)].
“the bulk of contracts signed in this country . . . are adhesion contracts, a rule automatically invalidating [such] contracts would be completely unworkable. Instead[,] courts engage in a process of judicial review[.] Finding that there is an adhesion contract is the beginning point for analysis, not the end of it; what courts aim at doing is distinguishing good adhesion contracts which should be enforced from bad adhesion contracts which should not.”
Id
. (quoting
State ex rel. Dunlap v. Berger
,
In the case sub judice , the petitioner argues that although she was aware that her employment at GameStop was at will, she claims that she was never advised that she was agreeing to arbitrate future claims against the company simply by signing the Acknowledgment. The petitioner argues that she is a high school graduate who was unemployed when she sought employment with GameStop [11] and that she possessed no bargaining power against GameStop, an international corporation. She contends that she was required to sign the Acknowledgment if she wished to be employed by GameStop; that “there were no meaningful alternatives available” to her; and that “[t]here was no negotiation.” GameStop counters that there is simply no evidence that the petitioner, who was twenty- seven years old and qualified for employment as a GameStop Assistant Manager, was not capable of understanding the clear import of the Acknowledgment that stated: “I understand that . . . I am agreeing that all workplace disputes or claims . . . will be resolved under the GameStop C.A.R.E.S. program rather than in court.” GameStop further argues that the petitioner had the ability to reject its offer of employment.
Notwithstanding her assertions to the contrary, the petitioner has failed to offer
any evidence that she was incapable due to age, literacy or lack of sophistication to
understand the clear terms of the arbitration agreement or the Acknowledgment she signed
*31
upon her employment.
[12]
See Brown II
,
Furthermore, the petitioner’s claim that she was not advised that she was
agreeing to arbitrate furture claims against GameStop by signing the Acknowledgment is
without merit. As previously established, the language of the Acknowledgment was
abundantly clear: “I understand that . . . I am agreeing that all workplace disputes or claims
. . . will be resolved under the GameStop C.A.R.E.S. program rather than in court.” “A court
can assume that a party to a contract has read and assented to its terms, and absent fraud,
misrepresentation, duress, or the like, the court can assume that the parties intended to
enforce the contract as drafted.”
Adkins v. Labor Ready, Inc.
, 185 F.Supp.2d 628, 638
(S.D.W.Va. 2001).
See Sedlock v. Moyle
,
As previously discussed, upon her employment with GameStop, the petitioner
was presented with the GameStop C.A.R.E.S. Rules, at which time she was also presented
with and signed the Acknowledgment. It is beyond cavil that the stated purpose of the
Acknowledgment was to make clear to the petitioner that by continuing her employment with
GameStop, she agreed to submit all covered disputes to arbitration. The petitioner fails to
offer any evidence demonstrating that the arbitration agreement was procedurally
unconscionable because it “involve[d] . . . inadequacies that result[ed] in the lack of a real
and voluntary meeting of the minds . . . .”
Brown II
,
2. Substantive Unconscionability
With regard to substantive unconscionability, this Court has held as follows:
Substantive unconscionability involves unfairness in the
contract itself and whether a contract term is one-sided and will
have an overly harsh effect on the disadvantaged party. The
factors to be weighed in assessing substantive unconscionability
vary with the content of the agreement. Generally, courts should
consider the commercial reasonableness of the contract terms,
the purpose and effect of the terms, the allocation of the risks
between the parties, and public policy concerns. Syllabus Point
*34
19,
Brown v. Genesis Healthcare Corp.
,
Brown II
,
The petitioner argues that, under the terms of the arbitrаtion agreement, there is no mutual obligation to arbitrate because the agreement gives GameStop the unfettered and unilateral right to modify or discontinue the GameStop C.A.R.E.S. program. The petitioner contends that this provision renders the agreement substantively unconscionable and, therefore, unenforceable. GameStop counters that the agreement does not give it the unfettered right to change or discontinue the C.A.R.E.S. program; to the contrary, GameStop argues that, under the terms of the agreement, it is required to give employees thirty days notice of any modification to, or rescission of, the GameStop C.A.R.E.S. program, and any such modification or rescission is to be applied prospectively only. Therefore, GameStop argues that the arbitration agreement is not substantively unconscionable and, as a result, is enforceable.
This Court has recognized that “‘[s]ome courts suggest that mutuality of
obligation is the locus around which substantive unconscionability analysis revolves[]’” and
that, “‘[i]n assessing substantive unconscionability, the parаmount consideration is
*35
mutuality.’”
Sanders
,
As we held in syllabus point ten of Dan Ryan Builders , In assessing whether a contract provision is substantively unconscionable, a court may consider whether the provision lacks mutuality of obligation. If a provision creates a disparity in the rights of the contracting parties such that it is one-sided and unreasonably favorable to one party, then a court may find the provision is substantively unconscionable.
230 W.Va. at __, 737 S.E.2d at 552. With regard to GameStop’s right to modify or discontinue the GameStop C.A.R.E.S. program, the arbitration agreement states as follows:
GameStop may from time to time modify or discontinue GameStop C.A.R.E.S. by giving covered employees thirty (30) calendar days notice; however, any such modification or rescission shall be аpplied prospectively only. An employee shall complete the processing of any dispute pending in GameStop C.A.R.E.S. at the time of an announced change, under the terms of the procedure as it existed when the dispute was initially submitted to GameStop C.A.R.E.S.
Thus, contrary to the petitioner’s argument that the foregoing provision gives GameStop the unfettered right to alter or rescind the GameStop C.A.R.E.S. Rules, the clear language of this provision limits GameStop’s ability in this regard by requiring it to give covered employees thirty days notice of any modification or rescission, which “shall be applied prospectively only.” Furthermore, any dispute pending at the time GameStop modifies the agreement is to proceed “under the terms of the procedure as it existed when the dispute was initially submitted . . . .” This provision does not render the arbitration agreement substantively unconscionable.
A similar provision was considered in
Martin v. Citibank, Inc
., 567 F.Supp.2d
36 (D.C.C. 2008), in which the United States District Court for the District of Columbia
concluded that “in order to modify terms of the [arbitration] policy, defendant must provide
thirty (30) days advance noticе to employees, barring any ‘unfair retroactive application of
amendments.’”
Id
. at 45. The court in
Martin
determined that, based upon this language, it
was “satisfied that requiring defendant to provide thirty days notice of prospective
modifications affords employees sufficient protection against inequitable assertions of
power.”
Id. See Hardin v. First Cash Financial Services
,
As previously established, the GameStop C.A.R.E.S. Rules are “a mutual
agreement to arbitrate” under which both GameStop and the petitioner “agree that the
procedures provided in these Rules will be the sole method used to resolve any Covered
Claim” and that an arbitrator’s decision is final and binding. GameStop’s limited ability
under the arbitration agreement to modify or discontinue the GameStop C.A.R.E.S. Rules in
no way negates the parties’ mutual agreement to arbitrate. GameStop is required to give
employees thirty days notice of any modification or rescission and any such modification or
rescission may only be applied prospectively. Furthermore, if a dispute is pending at the time
a modification to the program is made, such disputes are to proceed under the terms of the
program as they existed when the dispute was initiated. This provision and its effects are not
overly harsh and in no way “create[] a disparity in the rights оf the contracting parties such
that it is one-sided and unreasonably favorable to” GameStop.
Dan Ryan Builders
, 230
W.Va. at__,
IV. Conclusion
Based upon all of the above, the October 10, 2012, circuit court order dismissing the petitioner’s claims pending their submission to final and binding arbitration is hereby affirmed.
Affirmed. is that the petitioner’s claims are not barred under the arbitration provision and that the state law claims alleged by the petitioner are subject to the two-year statute of limitations applicable to the petitioner’s claims. This is also consistent with the GameStop C.A.R.E.S. Rules which provide that “[t]he Notice of Intent to Arbitrate must be received within the time period allowed by law applicable to the Covered Claim at issue, just as if you were proceeding in court.” As the Rules further make clear, “[t]his is commonly referred to as a statute of limitations and is the period of time that is provided by law for bringing a claim.” See Pomposi , 2010 WL 147196 at *12 (holding that “under the plain language оf the agreement, the only mandatory deadline imposed by C.A.R.E.S. is the one imposed by law, namely, the deadline provided by the statute of limitations applicable to the claim in dispute.”). Therefore, given GameStop’s position that the arbitration provision above does not shorten the statute of limitations within which the petitioner may bring a claim under state law, we need not address the petitioner’s argument that the provision is substantively unconscionable.
32
Notes
[1] The Handbook also advises employees that it “is intended to answer most of your questions, explain our important policies and provide guidelines on our Company’s standards and expectations.” It includes information about, inter alia , GameStop’s drug, alcohol and smoke-free policy; “work guidelines” (e.g., the use of name badges; personal and general appearance; schedules, attendance and absence policies; store hours; and parking); proper use of company resources; payroll; safety; loss prevention; performance and promotion; benefits; and standards of conduct.
[2] C.A.R.E.S stands for “Concerned Associates Reaching Equitable Solutions.”
[3]
See also
Syl. Pt. 4,
State ex rel. AMFM, LLC v. King
, __ W.Va. __, __, 740 S.E.2d
66, 69 (2013) (“‘The fundamentals of a legal contract are competent parties, legal subject
matter, valuable consideration and mutual assent. There can be no contract if there is one of
these essential elements upon which the minds of the parties are not in agreement.’ Syllabus
Point 5,
Virginian Export Coal Co. v. Rowland Land Co.
,
[4] The plaintiff in
Curry
brought an action alleging pregnancy and disability
discrimination against her former employer.
[5] See supra, n.1.
[6] The GameStop C.A.R.E.S. Rules were previously considered in
Ellerbee v.
GameStop, Inc.
, 604 F.Supp.2d 349 (D.Mass 2009). In
Ellerbee
, the District Court of
Massachusetts addressed “[t]he essential question [of] whether Plaintiff accepted the
arbitration agreement contained in the Rules document.”
Id.
at 354. The plaintiff argued,
inter alia
, that he did not agree to the GameStop C.A.R.E.S. Rules and “that he did not initial
for their receipt.”
Id
. In concluding that the plaintiff had entered into a valid agreement to
arbitrate with GameStop, the
Ellerbee
court reasoned,
inter alia
, that the GameStop
C.A.R.E.S. Rules were given to the plaintiff; were “crystal clear;” and that the evidence
showed that the store manager advised the plaintiff “of both the binding nature of the
arbitration agreement and its scope.”
Id.
at 355. The court stated that, under Massachusetts
law, “[f]or the arbitration agreement to be binding, [GameStop] was not required to explain
C.A.R.E.S. to Plaintiff’s satisfaction, to obtain his initials on a receipt, or to ensure that
Plaintiff read the document he was handed . . . .”
Id.
Rather, GameStop “was required only
to give Plaintiff the information sufficient to put a reasonably prudent employee on adequate
notice of the agreement to arbitrate.”
Id.
The court in
Ellerbee
found that “[t]here can be
no doubt that the Rules specified that the C.A.R.E.S. Program covered arbitration and was
binding upon Plaintiff . . . . [t]he Rules contained a mandatory arbitration procedure.”
Id.
See also Pomposi v. GameStop, Inc.
,
[8] “‘Unconscionability is an equitable principle, and the determination of whether a
contract or a provision therein is unconscionable should be made by the court.’”
Brown II
,
[9] However, we have recognized that “‘[i]n most commercial transactions[,] it may be
assumed that there is some inequality of bargaining power, and this Court cannot undertake
to write a special rule of such general application as to remove bargaining advantages or
disadvantages in the commercial area, nor do we think it is necessary that we undertake to
do so.’”
Johnson Controls
,
[10] For a recent discussion on the use of a sliding scale in assessing unconscionablity, see Melissa T. Lonegrass, “Finding Room for Fairness in Formalism – The Sliding Scale Approach to Unconscionability,” 44 Loyola U. Chi.L.J. 1 (2012).
[11] The petitioner represents that she had previously been employed at a gas station and held only a few part time jobs prior to working at GameStop.
[12] The petitioner concedes that she did not seek to introduce evidence or otherwise develop a factual record regarding whether her age, literacy, or lack of sophistication precluded her from understanding the GameStop C.A.R.E.S. Rules or the Acknowledgment form she signed.
[13] The petitioner also argues that the GameStop C.A.R.E.S. program is substantively unconscionable because it shortens the statute of limitations within which the petitioner may bring her claims. However, GameStop’s position before both the circuit court and this Court