CHARLESTON – The West Virginia Supreme Court of Appeals ruled that Halliburton Energy Services did not actively participate in a lawsuit and, because of that, its motion to compel arbitration granted by Kanawha Circuit Court was affirmed.
Richard Parsons asserted that Halliburton Energy Services implicitly waived a contractual right to arbitration by participating in litigation.
Kanawha Circuit Court entered an order finding that Halliburton did not waive its right to arbitration because it did not participate in Parson’s lawsuit and because the first court filing asserted the contractual right to arbitration.
The State Supreme Court affirmed the circuit court’s order compelling the parties to arbitrate their dispute, according to an April 11 opinion.
Chief Justice Menis Ketchum authored the majority opinion. Justice Allen Loughry concurred in part and dissented in part and authored his own opinion. Justice Brent Benjamin deemed himself disqualified and did not participate.
Parsons was employed by Halliburton from June until October 2013 and within his employment agreement was a provision that all disputes with the defendant be resolved through arbitration.
On Dec. 3, 2013, Parsons filed a complaint in Kanawha Circuit Court alleging that Halliburton did not timely pay his final wages as required by the West Virginia Wage Payment and Collection Act. Parsons also sought to create a class action composed of other former employees who were not timely paid their final wages.
On July 7, 2014, Halliburton filed a motion seeking to compel the plaintiff to participate in arbitration Parsons responded to the motion, arguing that the defendant waives its contractual right to arbitration, however, the defendant had never filed an answer to the plaintiff’s complaint before moving to compel arbitration.
In an order dated Nov. 14, 2014, the circuit court granted the defendant’s motion, dismissed the complaint and compelled the parties to participate in arbitration.
The circuit court determined that the defendant had not waived its right under the arbitration provision and that the defendant had not “actively participated in this lawsuit.” Parsons then appealed to the Supreme Court.
“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,” the opinion states. “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.’”
The cases cited by the parties imply that this court should alter its general state law of waiver to incorporate a requirement of prejudice when examining arbitration contracts.
“Federal and state arbitration statutes require courts to assess arbitration contracts on those grounds that exist at law or in equity for the revocation of any contract, not create special rules for the evaluation of arbitration contracts,” the opinion states. “The general state law of contracts does not require a showing of prejudice to establish a waiver of other contract rights, and so does not require a showing of prejudice for arbitration contracts.”
While the burden was on the plaintiff to prove the defendant knew of its right to arbitrate, Ketchum wrote that the court presumed 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,” the opinion states. “There 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 by answering or responding to the civil complaint without asserting its right.”
The defendant made no formal, substantive response to any of the plaintiff’s requests, according to the opinion.
“On this record we cannot find any error in the circuit court’s conclusion that the defendant acted consistently with the arbitration agreement, and did not participate in the plaintiff’s lawsuit prior to July 2014,” the opinion states. “Viewing the totality of the circumstances, the defendant did not implicitly waive its right to arbitrate through its acts and language.”
In his concurring in part and dissenting in part opinion, Loughry said that while he concurred in the majority’s affirmance of the circuit court’s order dismissing the action and compelling arbitration, he dissented 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.”
“I cannot support the majority’s new points of law to the extent that they expressly reject requiring a party asserting a waiver of arbitration to demonstrate prejudice,” Loughry stated. “As this court held long ago, ‘[t]he law favors artibrations and every reasonable intendment will be indulged in support of them[.]’”
Parsons was represented by Jonathan R. Marshall and Ryan McCune Donovan of Bailey & Glasser; and Todd S. Bailess and Joy B. Mega of Bailess Law.
Halliburton was represented by Marla N. Presley and Bethany S. Wagner of Jackson Lewis.
W.Va. Supreme Court of Appeals case number: 14-1288