Supreme Court upholds arbitration clause in home construction lawsuit

By Jessica M. Karmasek | Mar 13, 2014

CHARLESTON -- The West Virginia Supreme Court of Appeals last week mostly upheld a Marion County court’s order compelling arbitration in a home construction case.

The state’s high court, in its ruling Friday, affirmed in part, reversed in part and remanded a March 15, 2013 order by Marion Circuit Judge David R. Janes.

Janes, in his order, granted a motion to dismiss and compelled arbitration in favor of defendants Lion Enterprises Inc. and T/A Bastian Homes.

The plaintiffs, Wayne and Joyce Kirby, appealed the order, arguing the circuit court erred in concluding that the arbitration provision was “bargained for,” the arbitration provision was “fairly negotiated” and that their claims are within the terms of the arbitration provision.

The Supreme Court agreed the construction contract was properly formed and “supported by sufficient consideration.”

“We affirm the circuit court’s determination on this issue, even though it was reached for the wrong reason,” Justice Margaret Workman wrote for the court.

In March 2009, the Kirbys entered into a written agreement with Bastian Homes for the construction of a new home in Fairmont. The agreement contained an arbitration clause.

Bastian Homes, in turn, subcontracted with Ed Dwire, doing business as Dwire Plumbing, to provide the necessary plumbing service.

Before the new home was fully constructed, there was a water leak that allegedly damaged major portions of the partially-constructed home.

In February 2012, the Kirbys filed a complaint against Bastian Homes and Dwire Plumbing, alleging that when their home was under construction it sustained substantial damage and there was a 10-month delay in completion of the home caused completely by the joint negligence of the two companies.

Bastian Homes moved to dismiss the complaint on the basis that the arbitration clause in the construction contract required the parties to submit the matter to arbitration.

The Kirbys, in response, argued the arbitration clause at issue was not “bargained for” and was therefore invalid.

In support of this, Wayne Kirby stated in an affidavit he was presented with the contract containing the arbitration clause, that he “raised objection” to the arbitration clause and that he was told “not to worry about it because they were bonded.”

Further, he stated, “it was pointed out to me that Bastion [sic] Homes would correct or repair any defects in workmanship if discovered by either of us and submitted to Bastion [sic] Homes within a year of possession of said home …”

Janes determined that the Kirbys’ claims were subject to arbitration.

The judge found “after reviewing the entire contract, the nature of the contracting parties and the parties’ bargaining positions … the arbitration provision was fairly negotiated and is not unconscionable, having not been presented with evidence sufficient for overcoming the general presumption that all arbitration provisions are bargained for.”

The high court, in its 17-page ruling, said the arbitration clause in a contract need not be specifically “bargained for.”

“While the circuit court determined that the arbitration clause at issue had been ‘bargained for,’ the determination was of no moment,” Workman wrote.

“Applying the law enunciated in Dan Ryan, so long as the construction contract in its entirety is well supported by an offer, acceptance and sufficient consideration, there is no requirement
that the arbitration clause be independently ‘bargained for’ in order for a contract to be formed.”

She continued, “In other words, the Petitioner could not have defeated the arbitration clause based upon the argument that the clause was not bargained for.”

The court said there is “no question” that the entire contract is “derived from an offer, acceptance and sufficient consideration.”

“Every page of the agreement was either signed by or initialed by the Petitioners, including specific handwritten details for the home set forth in ‘Construction Agreement Detail,’ all of which demonstrates an offer and acceptance between the contracting parties,” Workman noted.

“Further, the construction contract is supported by sufficient consideration in the amount of $179,371.”

As to whether the arbitration clause was neither procedurally or substantively “unconscionable,” the Supreme Court reversed and remanded.

“The circuit court decided the issue of unconscionability in this case without the issue being fairly argued by the parties and without any factual development,” Workman explained.

Justice Menis Ketchum concurred in a separate, six-page opinion.

“In my review of the arbitration provision and the terms of the contract relating to the provision, I find several issues within the contract that may render enforcement of the arbitration provision unconscionable,” he noted.

“These problems should be considered by the circuit court during the unconscionability analysis on remand.”

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