Lead Opinion
In this appeal from the Circuit Court of Kanawha County, we address the state common law doctrine of waiver as it relates to arbitration. The plaintiff asserts that the defendant implicitly waived a contractual right to arbitration by participating in litigation.
The circuit court entered an order finding the defendant had not waived its right to arbitration because it did not participate in the plaintiffs lawsuit, and because the defendant’s first court filing asserted the contractual right to arbitration. As set forth below, we affirm the circuit court’s order compelling the parties to arbitrate their dispute.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Richard Parsons was employed by defendant Halliburton Energy Services, Inc. Within the plaintiffs employment agreement was a provision that all disputes with the defendant “shall be finally and conclusively resolved through arbitration .., instead of through trial before a court.”
The plaintiff worked for the defendant from June until October 2013. On December 3, 2013, the plaintiff filed a complaint in the Circuit Court of Kanawha County alleging that the defendant did not timely pay him his final wages as required by the West Virginia
On July 7, 2014, some seven months after the plaintiff filed his complaint, the defendant’s first court filing was a motion seeMng to compel the plaintiff to participate in arbitration. The plaintiff responded to the motion by arguing that the defendant had waived its contractual right to arbitration by failing to timely raise arbitration, and by acting inconsistently with its contractual right to arbitration in the previous seven months. The defendant never filed an answer to the plaintiffs complaint before moving to compel .arbitration, yet the plaintiff contends the defendant still participated in the litigation.
As evidence of the defendant’s participation, the plaintiff asserts that shortly after the complaint was filed, on December 16, 2013, counsel for the defendant exchanged emails with plaintiffs counsel asking for a 45-to-60 day filing extension to plead in the lawsuit. Defense counsel stated the defendant was “in the process of tracking down whether and to what extent” other employees were not paid in accordance with the WPCA, and offered to produce information about other employees to “short-circuit” discovery and litigation. Plaintiffs counsel agreed to the delay by the defendant.
On April 21, 2014, defense counsel contacted plaintiffs counsel by e-mail and asked for additional time to plead. Defense counsel asked if he was “still okay with the responsive pleading deadline and, if we’re close, can I ask that it be pushed out again?” In a subsequent phone conversation with plaintiffs counsel, defense counsel said he expected to respond to the plaintiffs needs within two to three weeks.
Some five months after the complaint was filed, on May 22, 2014, plaintiffs counsel wrote an e-mail to defense counsel. Plaintiffs counsel noted that defense counsel had not produced the promised information, and said the plaintiff was not providing “an open-ended extension for Halliburton to re-spondí)]? . A new defense lawyer (within the same firm) promptly responded to the e-mail from plaintiffs counsel. The new defense lawyer stated the prior lawyer was no longer working on the case, and said she would need additional time to “get a handle on the status” of the case. Two new lawyers noted their appearances as counsel for the defendant in the last week of June 2014, and the defendant’s. first substantive filing in the court record—the motion to compel arbitration—-was filed on July 7, 2014.
In an order dated November 14, 2014, the circuit court granted the defendant’s motion, dismissed the plaintiffs complaint and compelled the parties to participate in arbitration. - The circuit court determined that the defendant had not waived its rights under the arbitration provision. Although the defendant admitted to a seven-month delay before moving for arbitration, the circuit court found that the defendant had “not actively participated in this lawsuit.” Moreover, the circuit court found the plaintiff was required, but had failed, to prove he was prejudiced by the defendant’s actions or delay.
The plaintiff now appeals the circuit court’s order dismissing his complaint and compelling him to arbitrate his claims against the defendant.
II.
STANDARD OF REVIEW
“Appellate review of a circuit court’s order granting a motion to dismiss a complaint is de novo.” Syllabus Point 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc.,
III.
ANALYSIS
The facts below are not disputed, and the parties agree that the plaintiffs claims fall within the scope of a clear and unambiguous arbitration agreement. Additionally, the plaintiff does not challenge the enforceability
The plaintiff insists the defendant actively participated in the underlying litigation by volunteering to produce class-wide discovery and by repeatedly seeking extensions of time to file a responsive pleading. The plaintiff argues the defendant’s actions were contrary to its contractual right to avoid the court system and demonstrated the defendant’s intent to waive the protection afforded by the contractual arbitration provision.
The defendant counters that these actions did not rise to a level of “substantial participation” in the litigation process, and on balance are not of enough significance to demonstrate waiver. Furthermore, the defendant asserts the plaintiff was required to establish “actual prejudice” before a court could find waiver of a contract right, and asserts the plaintiff failed to meet this burden.
It is a well-established principle of contract law that contract rights can be waived. Under West Virginia contract law (and the contract law of most other states), the “waiver” of a contract right is “defined as the voluntary, intentional relinquishment of a known right.” Hoffman v. Wheeling Sav. & Loan Ass’n,
Waiver of a contract right may be made by an express statement or agreement, or it may be implied from the conduct of the party who is alleged to have waived a right. “Waiver may be established by express conduct or impliedly, through inconsistent' actions.” Ara,
To rely upon the doctrine of waiver under the common law, a party is not required to show prejudice or detrimental reliance caused by the opposing party’s waiver of a contract right. As Chief Justice Davis stated, “The doctrine of waiver focuses on the conduct of the party against whom waiver is sought, and requires that party to have intentionally relinquished a known right. There is no requirement of prejudice or detrimental reliance by the party asserting waiver.” Potesta v. U.S. Fid. & Guar. Co.,
Waiver does not require proof of prejudice or detrimental reliance because “[wjaiver is within the control of the party who chooses to relinquish a condition [in the contract], quite apart from whether another party relies on relinquishment.” 8 Catherine M.A. McCauliff,- Corbin on Contracts § 40.1 (1999). ‘Waiver is essentially unilateral in its character; it results as a legal consequence from some act or conduct of the party against whom it operates; no act of the party in whose favor it is made is necessary to complete it.” Equitable Life Assur. Soc’y of U.S. v. Ellis,
Under general principles of state contract law, waiver requires proof of “a voluntary act which implies a choice by the party to dispense with something of value, or to forego some advantage which he might at his option have demanded and insisted on.” Hoffman,
To effect a waiver, there must be evi-' dence which demonstrates that a party has intentionally relinquished a known right. Estoppel applies when a party is induced to act or to refrain from acting to her detriment because of her reasonable reliance on another party’s misrepresentation or concealment of a material fact.
In summary, on the question of prejudice or detrimental reliance, the distinction between the common law doctrines of estoppel and waiver is simple: estoppel requires proof of prejudice or detrimental reliance; waiver does not. We therefore hold that the common-law doctrine of waiver focuses on the conduct of the party against whom waiver is sought, and requires that party to have intentionally relinquished a known right. A waiver may be express or may be inferred from actions or conduct, but all of the attendant facts, taken together, must amount to an intentional relinquishment of a known right. There is no requirement of prejudice or detrimental reliance by the party asserting waiver.
Still, the doctrine of waiver is sometimes confused with the doctrine of estoppel, particularly on the question of prejudice and detrimental reliance. The result is that “the terms ‘waiveri and ‘estoppel’ have often been used without careful distinction, and thereby abused and confused.” Salloum Foods & Liquor, Inc.,
Cases in West Virginia have not been immune to the confusion and have indiscriminately used the terms “waiver” and “estoppel.” In Potesta, Chief Justice Davis recognized that the terms “are often used interchangeably with respect to insurance law.”
The contract right at issue in this case involves arbitration. Both federal and state laws reflect a strong public policy recognizing arbitration as an expeditious and relatively inexpensive forum for dispute resolution. See Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp.,
Nonetheless, federal and West Virginia courts may refuse to enforce an arbitration agreement “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2; see also W.Va. Code § 55-10-8 [2015] (An arbitration agreement “is valid, enforceable and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract”). We summarized the law in this way:
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 Corp.,
Stated differently, “[t]he FAA recognizes that an agreement to arbitrate is a contract. The rights and liabilities of the parties are controlled by the state law of contracts.” Geological Assessment & Leasing,
Hence, we apply the general state law of contracts pertaining to waiver and reach an ineluctable conclusion: The right to arbitration, like any other contract right, can be waived. To establish waiver of a contractual right to arbitrate, the party asserting waiver must show that the waiving party knew of the right to arbitrate and either expressly waived the right, or, based on the totality of the circumstances, acted inconsistently with the right to arbitrate through acts or language. There is no requirement that the party asserting waiver show prejudice or detrimental reliance. ' .See also, Barden & Robeson Corp.,
Most states, including West Virginia, find that constructive knowledge is sufficient for the waiver of a contractual right, including the right to arbitration. As this Court said in Hoffman, “The essential elements of a waiver, within the definitions already given, are the existence, at the time of the alleged waiver, of a right, advantage, or benefit, the knowledge, actual or constructive, of the existence thereof, and an intention to relinquish such right, advantage, or benefit.”
Under contract law ... a finding of waiver does not require that the party have actual knowledge of its legal rights [to arbitration]. It is sufficient if the waiving party had “reason to know the essential facts.” Given that the impact of the- .delay [in turning to litigation before arbitration] is the same regardless of the intent and given that the waiver of the right to arbitrate does not result in the loss of any substantive right, it does not seem unduly onerous to charge the parties to a contractual dispute with constructive knowledge of the terms of the underlying contract,
Thomas J. Lilly, Jr., Participation in Litigation as a Waiver of the Contractual Right to Arbitrate: Toward a Unified Theory, 92 Neb. L. Rev. 86,122 (2013); see generally In re Estate of Cortez,
The parties in this case dispute what circumstances are required to prove a party
Unfortunately, most of the cases cited by the parties concern whether, or to what degree, the party resisting arbitration must show prejudice in order to establish that the other party waived its right to arbitrate by participating in litigation. Some cases cited by the parties require no prejudice,
We decline to follow the panoply of approaches cited by the parties because, under West Virginia’s long-established law of contracts, courts do not require a showing of prejudice to establish a waiver of contract rights. As we have stated, “[t]he doctrine of waiver focuses on the conduct of the party against whom waiver is sought, and requires that party to have intentionally relinquished a known right. There is no requirement of prejudice or detrimental reliance by the party asserting waiver.” Potesta,
We turn now to the instant case. The undisputed facts are that there is a written arbitration agreement that encompasses the dispute between the parties. While the burden was on the plaintiff to prove the defendant knew of its right to arbitrate, we presume the defendant at least constructively knew because it was both a signatory to the arbitration contract and asserted the arbitration contract in its first court filing. The plaintiff filed his complaint in December 2013, and the defendant’s first filing in the circuit court was a motion to dismiss that clearly asserted the arbitration agreement.
Thére is nothing in the record to suggest the defendant expressly waived its right to arbitrate. The defendant also did not implicitly waive its contractual right to arbitration
The question then becomes whether the defendant implicitly waived the right to arbitrate, by acting inconsistently with the right between December 2013 and the filing of the motion to dismiss in July 2014. The delay alone is meaningless; it is the circumstances surrounding the defendant’s acts and language that determine whether the defendant implicitly intended to waive the right to arbitrate. The record essentially shows that the defendant asked, three times, for additional time to respond to the plaintiffs complaint. The plaintiff acceded to these requests, even though he was under no obligation to do so. The parties did not comply with Rule 6(b) of the West Virginia Rules of Civil Procedure and file a written stipulation with the circuit court agreeing to an enlargement of the time to respond to the plaintiffs complaint.
IV.
CONCLUSION
We find no error in the circuit court’s November 14, 2014, order dismissing the plaintiffs complaint and compelling the parties to arbitrate their dispute.
Affirmed.
Notes
. See W.Va.Code §§ 21-5-1 to -18.
. See also, Nationwide Mut. Ins. Co. v. Smith,
. Even though proof of prejudice is irrelevant to establishing a waiver, prejudice often occurs following a waiver. The subsequent prejudice or reliance gives rise to an estoppel:
Generally, the promisor's waiver of a condition is followed by the promisee's substantial change of position. At the very least, the promisee will be induced by the waiver not to perform the condition, if the condition consists of some act or forbearance of the promisee. Thus, if a promisor’s duty to convey [property] is conditional on payment by a stated day, the promisor's waiver of the condition may induce the promisee to cease efforts to raise the money and to forbear to pay on the day. Here we have ample reason for an estoppel, or for the enforcement of a promise because of subsequent reliance.
8 Corbin on Contracts § 40,2. See also Restatement (Second) of Contracts § 84, cmt. b (1981) (" 'Waiver' is often inexactly defined as 'the voluntary relinquishment of a known right.' When the waiver is reinforced by reliance, enforcement is often said to rest on 'estoppel' "),
. We recognize that, in footnote 11 of Potesta, we specifically disapproved of Syllabus Point 3 of McMahon “to the extent that it refers to both waiver and estoppel[.]” Potesta,
.The parties cite to a footnote in a recent opinion where we suggested a party must show they were prejudiced by another party’s waiver of the contractual right to arbitration. Citing a federal case, we said that to demonstrate waiver of the contractual right to arbitrate, "a party must show: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Schumacher Homes of Circleville, Inc. v. Spencer,
. St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co.,
. Compare Am. Recovery Corp. v. Computerized Thermal Imaging, Inc.,
. Rule 6(b) of the Rules of Civil Procedure provides, in pertinent part, that, "[w]hen by these rules ... an act is required or allowed to be done at or within a specified time, all the parties to the action, by written stipulation filed with the court, may agree at any time to a different period[,]’’
Concurrence Opinion
concurring, in part, and dissenting, in part:
(Filed May 12, 2016)
I concur in the majority’s affirmance of the circuit court’s order dismissing the action and compelling arbitration. I dissent to the extent the majority overrules our precedent to pave the path for a new point of law that is contrary, not only to the strong federal policy favoring arbitration, but also to the majority of jurisdictions that require proof of prejudice before a waiver of arbitration rights will be found.
Our common law demonstrates that general contract defenses, such as waiver, “may be applied to invalidate an arbitration agreement.” Syl. Pt. 9, in part, Brown ex rel. Brown v. Genesis Healthcare Corp.,
in order to support estoppel or waiver, a party must have been induced to rely on certain facts, and must have done so to his detriment. Nisbet v. Watson [162 W.Va. 522 ],251 S.E.2d 774 (W.Va.1979), Syllabus Point 3; Humble Oil & Refining Co. v. Lane,152 W.Va. 578 ,165 S.E.2d 379 (1969); Helmick v. Broll,150 W.Va. 285 ,144 S.E.2d 779 (1965), Syllabus Point 2[.]
Mundy,
The Court in Potesta also cited, but did not overrule, syllabus point three of Jarvis v. Pennsylvania Cas. Co.,
The denial of liability under a policy of insurance on one or more grounds at a time when insurer has knowledge of other grounds of forfeiture, does not result in a waiver or estoppel as to such other grounds, where no prejudice results to the insured from reliance on the initial statement of the insurer.
Potesta,
[a] state statute, rule, or common-law doctrine, which targets arbitration provisions for disfavored treatment and which is not usually applied to other types of contract provisions, stands as an obstacle to the accomplishment and execution of the*151 purposes and objectives of the Federal Arbitration Act, 9 U.S.C. § 2, and is preempted.
Syl. Pt. 8, Brown,
Under the majority’s new syllabus point six, if a party engages in acts inconsistent with its contractual right to arbitration, a court will be able to find a waiver of the right to arbitrate notwithstanding the absence of any detriment or prejudice to the party opposing arbitration. Clearly, this new point of law runs afoul of the majority of other jurisdictions that either require a showing of prejudice, or at least consider it a significant faútor in determining whether a party has waived the right to arbitrate.
In support of its decision to overrule National Mutual and Jarvis—to the extent each required proof of prejudice or detrimental reliance to establish a waiver of contractual rights—the majority distinguishes waiver and estoppel. However, the eases relied upon by the majority in support of its analysis, including a 1944 Delaware decision,
Given the strong federal policy favoring arbitration, I would reaffirm our existing common law in National Mutual and Jarvis that required a showing of detriment or prejudice before the waiver of a contract right could be found.
[t]his Court has been notoriously chastised by the United States Supreme Court for its failure to ... ensure that [ ] [arbitration] agreements are not “singled out” for hostile treatment or disfavor. See Marmet Health Care Center v. Brown,565 U.S. 530 ,132 S.Ct. 1201 ,182 L.Ed.2d 42 (2012). The majority’s opinion does little to convey that the United States Supreme Court’s message was reeeived[.]
Schumacher Homes of Circleville, Inc. v. Spencer,
For these reasons, I respectfully concur, in part, and dissent, in part.
. "Prejudice” is defined as "[d]amage or detriment to one's legal rights or claims.” Black's Law Dictionary 1370 (10th ed.2014).
. See County of Hawai'i v. Unidev, LLC, 128 Hawai’i 378,
. A survey of our law reveals that a showing of detriment or prejudice has also been required or considered in various non-contractual situations before a waiver of some right will be found. See West Virginia Bd. of Educ. v. Marple,
. Cf. Earl T. Browder, Inc. v. Cnty. Ct. of Webster Cnty.,
. See Aurora Healthcare, Inc. v. Ramsey,
. See FPE Found v. Cohen, 801 F.3d 25, 31 (1st Cir.2015) (citation omitted) ("As we have consistently said, 'prejudice is essential for a [finding of] waiver’ ”); Technology in Partnership, Inc. v. Rudin, 538 Fed.App’x. 38, 39 (2nd Cir.2013) (internal citations omitted) (" 'The key to a waiver analysis is prejudice.' ”); In re Pharmacy Ben. Managers Antitrust Litig.,
. Nathan Miller, Inc. v. N. Ins. Co. of New York,
. Salloum Foods & Liquor, Inc. v. Parliament Ins. Co.,
. Northwestern Nat. Life Ins. Co. v. Ward,
. Equitable Life Assur. Soc’y of U.S. v. Ellis,
. Even states whose common law does not require a showing of prejudice to find a waiver of contractual rights have determined that prejudice is required for a waiver of arbitration rights. For example, in Perry Homes v. Cull,
Under Texas law, waiver may not include a prejudice requirement, but estoppel does. In cases of waiver by litigation conduct, the precise question is not so much when waiver occurs as when a party can no longer take it back. As noted above, Texas estoppel law does not allow a party to withdraw a representation once the other party takes "action or forbearance of a definite and substantial character.” Using precisely the same terms, the Restatement does not allow a party to withdraw an option contract when the offeree has taken substantial action based upon it. In these contexts, prejudice is an element of the normal contract rules.
Thus, we agree with the courts below that waiver of arbitration requires a showing of prejudice.
Id. at 595 (footnotes and internal citations omitted).
. The majority opinion in Schumacher was recently vacated by the United States Supreme Court in Schumacher Homes of Circleville, Inc. v. Spencer, — U.S. —,
