Opinion ID: 2655957
Heading Depth: 2
Heading Rank: 1

Heading: Improper Application of Harley Miller II

Text: We first address the issue of whether the circuit court correctly found that the arbitration provision was “bargained for” under the law established in Harley Miller II. See 160 W. Va. at 473-74, 236 S.E.2d 440-41, Syl. Pts. 1 and 3. The Petitioners argued that there was no valid arbitration agreement between the parties because the arbitration agreement was not “bargained for.” In resolving the issue, we acknowledge that in Harley Miller II, the Court held in 1977 that an arbitration provision contained within a contract must be “bargained for.” See id.; see also supra note 3 (setting forth full text of syllabus point). The Court also established a presumption that when “an arbitration provision in a written contract was bargained for . . . that arbitration was intended to be the exclusive means of resolving disputes arising under the contract[.]” Id., Syl. Pt. 3; see supra note 3 (setting forth full text of syllabus point). Harley Miller I and Harley Miller II were important decisions insofar as they greatly advanced the law of arbitration in this State in the 1970s.5 Both decisions, 5 See Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 670-71 nn. 52 & 57, 724 S.E.2d 250, 274-75 nn. 52 & 57 (2011), overruled in part on other grounds sub nom. Marmet Health Care Ctr, Inc. v. Brown, 132 S. Ct. 1201 (2012) (referring to Harley Miller II as setting forth “[t]he West Virginia common-law corollary to Section 2 [of the FAA]” and recognizing that prior to Harley Miller II, the Court routinely held in our cases that “‘[a]t common law an agreement to submit to arbitration was revocable at any time (continued...) 7 however, were rendered without the benefit of and guidance set forth in United States Supreme Court opinions6 that followed the Harley Miller cases and addressed the applicability of the Federal Arbitration Act (“FAA”), 9 United States Code Annotated §§ 1 to 16 (West 2009), to arbitration agreements. Subsequent to those more recent United States Supreme Court decisions, we discussed the applicability of the FAA to arbitration agreements in this State in State ex rel. Richmond American Homes of West Virginia, Inc. v. Sanders, 228 W. Va. 125, 717 S.E.2d 909 (2011), as follows: We begin by discussing the applicable law relating to the FAA. In Brown v. Genesis Healthcare Corp ., [228 W. Va. 646, 727 S.E.2d 250 (2011), overruled in part on other grounds sub nom. Marmet Health Care Center, Inc. v. Brown, 132 S. Ct. 1201 (2012)], we noted that the “primary 5 (...continued) before [an] award. . . . A contract to submit future differences to arbitration is not binding.’”). 6 See Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281 (1995) (“In any event, § 2 gives States a method for protecting consumers against unfair pressure to agree to a contract with an unwanted arbitration provision. States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause ‘upon such grounds as exist at law or in equity for the revocation of any contract.’ 9 U.S.C. § 2 (emphasis added). What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal ‘footing,’ directly contrary to the Act’s language and Congress’ intent. See Volt Information Sciences, Inc., 489 U.S. [468], at 474, 109 S.Ct. [1248], at 1253 [(1989)].”); Southland Corp. v. Keating, 465 U.S. 1 (1984) (deciding that Congress would not have wanted state and federal courts to reach different outcomes about the validity of arbitration in similar cases and concluding that the FAA preempts state law). 8 substantive provision” of the FAA is Section 2.7 We interpreted Section 2 as saying that “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.” In other words, Section 2 contains two parts: “the first part holds that written arbitration agreements affecting interstate commerce are ‘valid, irrevocable, and enforceable,’ but the second part is a ‘savings clause’ that allows courts to invalidate those arbitration agreements using general contract principles.” The purpose of the FAA is to impel “courts to treat arbitration agreements like any other contract. The Act does not favor or elevate arbitration agreements to a level of importance above all other contracts; it simply ensures that private agreements to arbitrate are enforced according to their terms.” Richmond Am. Homes, 228 W. Va. at 133, 717 S.E.2d at 917 (footnote added and footnotes omitted). Since recognizing the interplay of the FAA with arbitration agreements in this State, the Court was presented in Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281, 737 S.E.2d 550 (2012), with a certified question from the United States Court of Appeals 7 See 9 U.S.C.A. § 2 (“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”). 9 for the Fourth Circuit, which resolves the issue currently before the Court. In Dan Ryan, the Fourth Circuit posed the following question: “Does West Virginia law require that an arbitration provision which appears as a single clause in a multi-clause contract, itself be supported by mutual consideration when the contract as a whole is supported by adequate consideration?” Id. at 283, 737 S.E.2d at 552. In answering this question, this Court first recognized that “[t]he elements of a contract are an offer and an acceptance supported by consideration.” Id. at 287, 737 S.E.2d at 556 (citing First Nat’l Bank of Gallipolis v. Marietta Mfg. Co., 151 W. Va. 636, 153 S.E.2d 172 (1967); see New v. Gamestop, Inc., ___ W. Va. ___, ___, 753 S.E.2d 62, 71 2013) (“West Virginia contract law requires mutual assent to form a valid contract. . . . ‘“In order for this mutuality to exist, it is necessary that there be a proposal or offer on the part of one party and an acceptance on the part of the other. Both the offer and acceptance may be by word, act or conduct that evince the intention of the parties to contract. That their minds have met may be shown by direct evidence of an actual agreement. . . .”’) (citations and footnote omitted.)”). We then acknowledged that, just as in the instant case wherein the Petitioner argues that the arbitration clause was not “bargained for,” parties to contracts frequently challenge the enforceability of arbitration clauses--clauses which do not impose parallel duties to arbitrate on both parties--on the ground that the clauses lack consideration or lack equivalent promises (that is, 10 lack mutuality of obligation). However, the majority of courts conclude that the parties need not have separate consideration for the arbitration clause, or equivalent, reciprocal duties to arbitrate, so long as the underlying contract as a whole is supported by valuable consideration. 230 W. Va. at 288, 737 S.E.2d at 557. The Court held in syllabus point six of Dan Ryan that [t]he formation of a contract with multiple clauses only requires consideration for the entire contract, and not for each individual clause. So long as the overall contract is supported by sufficient consideration, there is no requirement of consideration for each promise within the contract, or of “mutuality of obligation,” in order for a contract to be formed. Id. at 283, 737 S.E.2d at 552. Pursuant to our holding in Dan Ryan, when challenging the enforceability because the arbitration clause was not supported by consideration, was not bargained for, or was not negotiated for, the focus is not upon the consideration or bargain for the singular arbitration clause. Instead, “[s]o long as the overall contract is supported by sufficient consideration, there is no requirement of consideration for each promise within the contract, or of ‘mutuality of obligation,’ in order for a contract to be formed.” Id. Since the Harley Miller II decision, the law of arbitration in this State as set forth in Harley Miller II has been largely preempted by the FAA as this Court has fully explained in our more recent arbitration cases. See, e.g., Dan Ryan, 230 W. Va. at 282, 11 737 S.E.2d at 552, Richmond Am. Homes, 228 W. Va. at 133, 717 S.E.2d at 917. An additional change that has occurred because of the preemption by the FAA, which we recognized in Dan Ryan, is the lack of a legal requirement that the arbitration clause be specifically “bargained for.” 230 W. Va. at 282, 737 S.E.2d at 552, Syl. Pt. 6. Notwithstanding these clear changes in the law, the parties and the circuit court continued to rely upon the principles enunciated in Harley Miller II,8 which was in error. To prevent this continued adherence to the principles set forth in Harley Miller II from occurring again in future cases, we hold that the law enunciated in syllabus point six of Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281, 737 S.E.2d 550 (2012), that “the formation of a contract with multiple clauses only requires consideration for the entire contract, and not for each individual clause” modified the law set forth in Board of Education v. W. Harley Miller, Inc., 160 W. Va. 473, 236 S.E.2d 439 (1977), to the extent that an arbitration clause in a contract need not be specifically “bargained for.” Consequently, while the circuit court determined that the arbitration clause at issue had been “bargained for,” the determination was of no moment. 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 8 See Harley Miller II, 160 W. Va. at 473, 236 S.E.2d at 440, Syl. Pt. 1 & 3. 12 that the arbitration clause be independently “bargained for” in order for a contract to be formed. See 230 W. Va. at 282, 737 S.E.2d at 552, Syl. Pt. 6. In other words, the Petitioner could not have defeated the arbitration clause based upon the argument that the clause was not bargained for. Having reviewed the contract at issue, 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. Further, the construction contract is supported by sufficient consideration in the amount of $179,371. Given our determination that 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.9 9 See Cadle Co. v. Citizens Nat’l Bank, 200 W. Va. 515, 518, 490 S.E.2d 334, 337 (1997)(“We believe the circuit court reached the correct result in this case, but for the wrong reasons. We agree with the court in Bank IV Topeka v. Topeka Bank & Trust Co., 15 Kan. App.2d 341, 343, 807 P.2d 686, 688 (1991) that “‘“where the trial court reaches the correct result based upon the wrong reason, this [C]ourt will affirm the trial court.’” Quoting, State v. Shehan, 242 Kan. 127, 131, 744 P.2d 824 (1987).”); Syl. Pt. 5, Hustead ex rel. Adkins v. Ashland Oil, Inc., 197 W. Va. 55, 475 S.E.2d 55 (1996) (“This Court may, on appeal, affirm the judgment of the lower court when it appears that such judgment is correct on any legal ground disclosed by the record, regardless of the ground, reason or theory assigned by the lower court as the basis for its judgment.” Syl. Pt. 3, Barnett v. Wolfolk, 149 W. Va. 246, 140 S.E.2d 466 (1965).”). 13