Court Opinion

ID: 4098933
Source: CourtListenerOpinion
Date Created: 2016-11-16 20:20:37.547724+00
Date Added: 2024-06-11T14:09:05.138556
License: Public Domain

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

                              September 2016 Term
                               _______________                        FILED
                                                                 November 16, 2016
                                   No. 15-0948                           released at 3:00 p.m.
                                                                       RORY L. PERRY II, CLERK
                                 _______________                     SUPREME COURT OF APPEALS
                                                                          OF WEST VIRGINIA

                SALEM INTERNATIONAL UNIVERSITY, LLC,

              A FOREIGN LIMITED LIABILITY CORPORATION,

                    AND JOHN LUOTTO, PRESIDENT,

                       Defendants Below, Petitioners

                                        v.

           TAYLOR BATES, MICHELLE SYLVA, AMY NORTHROP,

         CLARISSA HANNAH, AND GENA DELLI-GATTI ON BEHALF

        OF THEMESELVES AND ALL OTHERS SIMILARLY SITUATED,

                      Plaintiffs Below, Respondents

      ____________________________________________________________

                 Appeal from the Circuit Court of Harrison County

                     The Honorable James A. Matish, Judge

                           Civil Action No. 13-C-348-3

                       REVERSED AND REMANDED

      ____________________________________________________________

                           Submitted: October 11, 2016
                            Filed: November 16, 2016

Michael S. Garrison, Esq.                    Charles R. “Rusty” Webb, Esq.
Kelly J. Kimble, Esq.                        The Webb Law Centre, PLLC
Spilman, Thomas & Battle, PLLC               Charleston, West Virginia
Morgantown, West Virginia                    Attorney for Respondents

Eric W. Iskra, Esq.
Spilman, Thomas & Battle, PLLC
Charleston, West Virginia
Attorneys for Petitioners
JUSTICE BENJAMIN delivered the Opinion of the Court.

JUSTICE WORKMAN concurs and reserves the right to file a concurring opinion.

                              SYLLABUS BY THE COURT

              1.     “An order denying a motion to compel arbitration is an interlocutory

ruling which is subject to immediate appeal under the collateral order doctrine.” Syl. pt.

1, Credit Acceptance Corp. v. Front, 231 W. Va. 518, 745 S.E.2d 556 (2013).

              2.     “When a party, as part of an appeal from a final judgment, assigns as

error a circuit court’s denial of a motion to dismiss, the circuit court’s disposition of the

motion to dismiss will be reviewed de novo.” Syl. pt. 4, Ewing v. Bd. of Educ., 202 W.

Va. 228, 503 S.E.2d 541 (1998).

              3.     “[T]he trial court may rely on general principles of state contract law

in determining the enforceability of the arbitration clause.” Syl. pt. 4, in part, State ex.

Richmond Am. Homes of W. Va. v. Sanders, 228 W. Va. 125, 717 S.E.2d 909 (2011).

              4.     “The mere fact that parties do not agree to the construction of a

contract does not render it ambiguous. The question as to whether a contract is

ambiguous is a question of law to be determined by the court.” Syl. pt. 1, Berkeley Co.

Pub. Serv. Dist. v. Vitro Corp. 152 W. Va. 252, 162 S.E.2d 189 (1968).

                                              i
              5.     “Contract language is considered ambiguous where an agreement’s

terms are inconsistent on their face or where the phraseology can support reasonable

differences of opinion as to the meaning of words employed and obligations undertaken.”

Syl. pt. 6, State ex rel. Frazier & Oxley v. Cummings, 212 W. Va. 275, 569 S.E.2d 796

(2002).

              6.     “The term ‘ambiguity’ is defined as language reasonably susceptible

of two different meanings or language of such doubtful meaning that reasonable minds

might be uncertain or disagree as to its meaning.” Syl. pt. 4, Estate of Tawney v.

Columbia Nat. Res., 219 W. Va. 266, 633 S.E.2d 22 (2006).

              7.     “In determining whether or not the parties to a collective bargaining

agreement have agreed to submit a particular dispute to arbitration, it must be recognized

that there is a presumption favoring arbitration, and this presumption may be rebutted

only where it can be said with positive assurance that the arbitration clause is not

susceptible of an interpretation that covers the asserted dispute.” Syl. pt. 1, Local Div. No.

812 v. Transit Auth., 179 W. Va. 31, 365 S.E.2d 76 (1987).

                                              ii
Benjamin, Justice:

              The petitioners and defendants below, Salem International University,

LLC, and its president, John Luotto (collectively “Salem”), appeal the August 27, 2015,

order of the Circuit Court of Harrison County that denied Salem’s motion to stay

proceedings pending mandatory alternative dispute resolution of claims brought by

several former nursing students at Salem. Based on the parties’ briefs, oral arguments,

and relevant portions of the appendix, we reverse the circuit court’s order and remand for

further proceedings.

                     I. FACTUAL AND PROCEDURAL HISTORY

              The respondents and plaintiffs below, Taylor Bates, Michelle Sylva, Amy

Northrop, Clarissa Hannah, and Gena Delli-Gatti on behalf of themselves and all others

similarly situated, are former students in Salem’s nursing program who each signed

enrollment agreements with Salem, attended classes, and paid tuition to Salem. When the

respondents enrolled at Salem, they signed enrollment agreements that contained an

arbitration clause. This arbitration agreement provides as follows:

              You and [Salem International University] agree that any
              dispute or claim between you and SIU (or any company
              affiliated with SIU, or any of its officers, directors, trustees,
              employees or agents) arising out of or relating to this
              Enrollment Agreement, or, your enrollment or attendance at
              SIU, whether such dispute arises before, during, or after your
              attendance and whether the dispute is based on contract, tort,
              statute, or otherwise, shall be, at your or SIU’s election,
              submitted to and resolved by individual binding arbitration
              pursuant to the terms described herein. Arbitration shall be

                                             1
            conducted by the American Arbitration Association (“AAA”)
            pursuant to its rules and procedures. The party electing
            arbitration shall comply with the AAA notice requirements.
            Information about AAA is available at 1633 Broadway, 10th
            Floor, New York, New York 10019; Toll Free: 1-800-778­
            7879, or the arbitration Website at ACMEADR.COM. SIU
            agrees that it will not elect to arbitrate any individual claim
            that you bring in a West Virginia magistrate or small claims
            court (or in a similar court of limited jurisdiction subject to
            expedited procedures). If that claim is transferred or appealed
            to a different court, however, or if your claim exceeds the
            limits of the applicable small claims court, SIU reserves the
            right to elect arbitration and, if it does so, you agree that the
            matter will be resolved by binding arbitration pursuant to the
            terms of this Section. The arbitrator shall have no authority to
            arbitrate claims on a class action basis, and claims brought by
            or against you may not be joined or consolidated with claims
            brought by or against any other person. Any arbitration
            hearing shall take place in the federal judicial district in
            which you reside or pursuant to AAA rules and procedures.
            Each party will bear the expense of its own attorneys, experts,
            and witnesses regardless of which party prevails, unless
            applicable law or this Agreement gives a right to recover any
            of those fees from the other party. If the arbitrator determines
            that any claim or defense is frivolous or wrongfully intended
            to oppress the other party, the arbitrator may award sanctions
            in the form of fees and expenses reasonably incurred by the
            other party (including arbitration administration fees,
            arbitrator’s fees, and attorney, expert and witness fees), to the
            extent such fees and expenses could be imposed under Rule
            11 of the Federal Rules of Civil Procedure. The Federal
            Arbitration Act (“FAA”) 9 U.S.C. §§ 1, et seq., shall govern
            this arbitration provision. This arbitration provision shall
            survive the termination of your relationship with SIU. The
            above supersedes any inconsistent arbitration provision
            published in any other document, including, but not limited
            to, SIU catalogs.

Beneath the arbitration clause there is a box titled “NOTICE OF ARBITRATION

AGREEMENT:” that contains the following:

                                           2

             This agreement provides that all disputes between you and
             SIU will be resolved by BINDING ARBITRATION. You
             thus GIVE UP YOUR RIGHT TO GO TO COURT to assert
             or defend your rights under this contract (EXCEPT for
             matters that may be taken to SMALL CLAIMS COURT).
             *Your rights will be determined by a NEUTRAL
             ARBITRATOR and NOT a judge or jury. *You are entitled
             to a FAIR HEARING, BUT the arbitration procedures are
             SIMPLER AND MORE LIMITED THAN RULES
             APPLICABLE IN COURT. * Arbitration decisions are as
             enforceable as any court order and are subject to VERY
             LIMITED REVIEW BY A COURT. FOR MORE DETAILS
             *Review the provisions above, OR *Check our Arbitration
             Website @ ACMEADR.COM, OR *Call 1-800-000-0000.

             In August 2013, the respondents filed a putative class action complaint

against Salem. In the complaint, the respondents alleged that they were nursing students

who were enrolled at Salem in October 2012 and thereafter and were denied the

opportunity to complete their coursework in nursing at Salem as a result of the nursing

program’s loss of accreditation. The respondents stated claims for violation of the State

Consumer Credit and Protection Act, W. Va. Code §§ 46A-6-101–110, negligence,

breach of contract, breach of the duty of good faith and fair dealing, and conversion of

personal property.

             In February 2014, Salem filed a motion to stay proceedings pending

mandatory alternative dispute resolution in which it asserted that the respondents agreed

to arbitrate their claims against Salem through the American Arbitration Association

(“AAA”) pursuant to the enrollment agreement they signed. In the respondents’ reply to

                                           3

Salem’s motion, they asserted that the arbitration agreement at issue is unenforceable

because Salem had not complied with any of the requirements of the American

Arbitration Association Provision, the arbitration agreement at issue exempts class

actions from arbitration, and the arbitration agreement is procedurally and substantively

unconscionable. The circuit court thereafter entered an order for additional briefing in

which it ordered the parties to brief the following issues:

              a. May a Court order arbitration in a putative class action if
              the arbitration agreement states that class actions cannot be
              arbitrated;
              b. If the arbitration clause does not indicate that arbitration is
              mandatory, but is only invoked if one of the parties demands
              arbitration, may a court order arbitration; and
              c. Are plaintiffs’ claims covered by the arbitration agreement?

Subsequently, the parties filed additional memoranda of law, and the circuit court held a

hearing on the issues at which evidence was taken.

              By order entered August 27, 2015, the circuit court denied Salem’s motion

to stay proceedings pending mandatory alternative dispute resolution. Significantly, the

circuit court in its order addressed a single issue: “whether this otherwise valid

arbitration agreement acts as a class action waiver, barring the plaintiffs from seeking

judicial relief as a class. In other words, does the plaintiffs’ purported class action fall

within the scope of the arbitration provision at issue?” (Emphasis added.). In finding that

the arbitration agreement does not include a class action litigation waiver, the circuit

court relied primarily on two principles of law. First, the circuit court relied on this

Court’s holding in syllabus point 10 of Brown ex rel. Brown v. Genesis Healthcare, 228

                                              4

W. Va. 646, 724 S.E.2d 250 (2011) (Brown I), judgment vacated on other grounds by

Marmet Health Care Center, Inc. v. Brown, 132 S.Ct. 1201 (2012), which provides that

“[u]nder the Federal Arbitration Act, 9 U.S.C. § 2, parties are only bound to arbitrate

those issues that by clear and unmistakable writing they have agreed to arbitrate. An

agreement to arbitrate will not be extended by construction or implication.” In applying

this syllabus point to the arbitration agreement, the circuit court found that while the

agreement’s language implies a class action litigation waiver, the language is ambiguous.

Therefore, the circuit court concluded that because there is not a clear and unmistakable

waiver pursuant to syllabus point 10 of Brown I, the circuit court would not extend the

agreement, by construction or implication, to act as a class action litigation waiver.

              The second legal principle relied upon by the circuit court in making its

decision is the principle that when an ambiguity exists in a contract and the intent of the

parties cannot be determined, the ambiguous terms will be construed against the party

that drafted the agreement. The circuit court reasoned that because the language in the

arbitration agreement regarding a class action litigation waiver is ambiguous, it will be

construed against Salem which drafted the agreement.

              Salem now appeals the circuit court’s order denying its motion to stay

proceedings pending mandatory alternative dispute resolution.

                                              5

                             II. STANDARD OF REVIEW

              The order appealed from in this case is an order denying Salem’s motion to

compel the respondents to arbitrate their claims against Salem. Under our law, “[a]n

order denying a motion to compel arbitration is an interlocutory ruling which is subject to

immediate appeal under the collateral order doctrine.” Syl. pt. 1, Credit Acceptance Corp.

v. Front, 231 W. Va. 518, 745 S.E.2d 556 (2013). Therefore, the circuit court’s order is

properly before this Court.1 In addition, “[w]hen a party, as part of an appeal from a final

judgment, assigns as error a circuit court’s denial of a motion to dismiss, the circuit

court’s disposition of the motion to dismiss will be reviewed de novo.” Syl. pt. 4, Ewing

v. Board of Educ., 202 W. Va. 228, 503 S.E.2d 541 (1998). Accordingly, we will now

proceed to review the issue before us de novo.

                                     III. ANALYSIS

              As a preliminary matter, this Court wishes to clarify that the sole issue

before us is whether the circuit court erred in ruling that the arbitration agreement at issue

does not contain an enforceable class action litigation waiver. In their brief and oral

argument before this Court, the respondents presented several arguments in support of

       1
         In their brief, the respondents argue that the circuit court’s order is not ripe for
appeal because it does not constitute a final order. Specifically, the respondents assert
that the order is not final because the circuit court has not yet rendered its decision to
certify the putative class. The respondents explain that should class certification be
denied, the respondents will have individual claims, and a different analysis will be
required. Should class certification be granted, Salem will then have the opportunity to
appeal the denial of its motion to compel arbitration. This Court rejects this argument and
will proceed to consider the issue before us.
                                              6

their position that the arbitration agreement as a whole is not valid. The respondents

assert that if the class action waiver is deemed valid, it creates a fundamental inequity in

the parties’ rights that renders the arbitration clause unconscionable. The respondents

further aver that the arbitration agreement absent a class action waiver is procedurally

and substantively unconscionable. Finally, the respondents assert that arbitration is not

appropriate in this case because the respondents’ claims fall outside of the scope of the

arbitration agreement.

              Salem posits that the circuit court ruled that the arbitration agreement is

valid by referring to it as “this otherwise valid arbitration agreement.” Salem admits that

the circuit court did not undertake an in depth analysis or a meaningful discussion of the

validity of the agreement, but that the court included in its order the relevant legal

principles applicable to determining the validity of an arbitration agreement. Further,

Salem avers that the respondents cannot now challenge the validity of the arbitration

agreement because the respondents failed to cross-assign as error before this Court the

circuit court’s determination that the arbitration agreement was valid except for its

ambiguity regarding the respondents’ right to bring class action litigation.

              This Court finds that any challenges to the arbitration agreement’s validity

is not properly before this Court. According to Rule 10(f) of the West Virginia Rules of

Appellate Procedure:

                                             7

                      The respondent, if he is of the opinion that there is
              error in the record to his prejudice, may assign such error in a
              separate portion of his brief and set out authority and
              argument in support thereof in the manner provided in
              subsection (c) of this Rule. Such cross-assignment may be
              made notwithstanding the fact that the respondent did not
              perfect a separate appeal within the statutory period for taking
              an appeal. If the respondent’s brief contains cross-
              assignments of error, the cover page of the brief must clearly
              so reflect. The petitioner may respond to the cross-assignment
              of errors in the reply brief.

In the recent case of Trans-Allegheny Interstate Line Co. v. Daugherty, No. 13-0253,

2013 WL 6152606 (W. Va. November 22, 2013) (memorandum decision), this Court

declined to address a cross-assignment of error that was not presented with the required

specificity. In the instant case, no cross-assignment of error was presented challenging

the circuit court’s determination that the arbitration agreement at issue was otherwise

valid. Therefore, this Court will not address the respondents’ arguments regarding the

validity of the arbitration agreement. Rather, we will only address whether the arbitration

agreement contains an enforceable class action litigation waiver.

              Regarding the waiver issue, Salem argues that that the circuit court erred in

finding that the class action waiver language in the arbitration agreement is ambiguous.

As support for its argument that the class action litigation waiver is clear, Salem points to

the language of the agreement requiring “individual binding arbitration,” and that claims

“may not be joined or consolidated with claims brought by or against any other person.”

According to Salem, the ordinary, dictionary definition of “join” is “to put or bring

together so as to form a unit.” Similarly, the term “consolidate” means “to join together

                                             8

into one whole; unite; merge.” Salem avers that when one attributes to the terms “join”

and “consolidate” their ordinary meaning, and reading them together, with the

requirement that claims be submitted to “individual arbitration,” one is compelled to

conclude that claims may only be brought on an individual basis, and not as part of a

class action.

                In addition, Salem contends that the language “the arbitrator shall have no

authority to arbitrate claims on a class action basis” is clearly consistent with the

provision’s prohibition against consolidated claims. Further, Salem emphasizes the fact

that the language “[t]he arbitrator shall have no authority to arbitrate claims on a class

action basis” appears in the same sentence and is connected with the word “and” to the

language that “claims brought by or against you may not be joined or consolidated with

claims brought by any other person.” Salem avers that the connecting of these two

provisions can only be interpreted to support Salem’s position that class action litigation

claims are effectively waived under the agreement. Otherwise, says Salem, the second

portion of the sentence would be rendered meaningless in violation of a fundamental rule

of construction. Finally, Salem opines that it would be nonsensical for the respondents to

avoid the mandatory nature of the arbitration agreement simply by making their claims a

class action.

                The respondents counter that the language in the arbitration agreement is

ambiguous regarding a class action litigation waiver. The respondents explain that the

                                              9

agreement allows for multiple reasonable interpretations regarding the availability of a

class action because the language implies a waiver of class action rights but does not

explicitly waive those rights. At worst, say the respondents, the agreement contradicts

itself by requiring all claims to be subject to arbitration and then removing class actions

from the jurisdiction of the arbitrator. The respondents emphasize that the agreement

does not state that the respondents agree not to act as class representatives or participate

in a class action. The respondents conclude that because the class action waiver language

is not clear and unmistakable and as a result must be construed against Salem as the

drafter of the agreement, the circuit court correctly ruled that there is no valid class action

litigation waiver.

              The parties agree that the issue in this case is governed by the Federal

Arbitration Act (“FAA”), 9 U.S.C. §§ 1, et seq.2 In construing the agreement at issue, we

are mindful “the trial court may rely on general principles of state contract law in

determining the enforceability of the arbitration clause.” Syl. pt. 4, in part, State ex rel.

Richmond Am. Homes of W. Va., Inc. v. Sanders, 228 W. Va. 125, 717 S.E.2d 909

(2011). In this case, this Court must determine whether the contract language is

ambiguous. “The mere fact that parties do not agree to the construction of a contract does

       2
         The arbitration agreement provides that “[t]he Federal Arbitration Act (‘FAA’), 9
U.S.C. §§ 1, et seq., shall govern this arbitration provision.” See State ex rel. City
Holding Co. v. Kaufman, 216 W. Va. 594, 598, 609 S.E.2d 855, 859 (2004) (explaining
that “[t]he Federal Arbitration Act applies to an agreement to arbitrate, and the
determination as to whether all of the claims are referable to arbitration is a matter
governed by application of federal law” (citation omitted)).
                                              10

not render it ambiguous. The question as to whether a contract is ambiguous is a question

of law to be determined by the court.” Syl. pt. 1, in part, Berkeley Co. Pub. Serv. Dist. v.

Vitro Corp., 152 W. Va. 252, 162 S.E.2d 189 (1968). Rather, “[c]ontract language is

considered ambiguous where an agreement’s terms are inconsistent on their face or where

the phraseology can support reasonable differences of opinion as to the meaning of words

employed and obligations undertaken.” Syl. pt. 6, State ex rel. Frazier & Oxley, L.C. v.

Cummings, 212 W. Va. 275, 569 S.E.2d 796 (2002). Also, “[t]he term ‘ambiguity’ is

defined as language reasonably susceptible of two different meanings or language of such

doubtful meaning that reasonable minds might be uncertain or disagree as to its

meaning.” Syl. pt. 4, Estate of Tawney v. Columbia Nat. Res., 219 W. Va. 266, 633

S.E.2d 22 (2006).

              In addition, we are also mindful that

              [i]n determining whether the language of an agreement to
              arbitrate covers a particular controversy, the federal policy
              favoring arbitration of disputes requires that a court construe
              liberally the arbitration clauses to find that they cover
              disputes reasonably contemplated by the language and to
              resolve doubts in favor of arbitration.

State ex rel. City Holding Co. v. Kaufman, 216 W. Va. 594, 598, 609 S.E.2d 855, 859

(2004) (citations omitted). In Local Division No. 812 v. Transit Authority, 179 W. Va. 31,

34–35, 365 S.E.2d 76, 79–80 (1987), this Court expounded upon the rule that arbitration

agreements should be read in favor of arbitration as follows:

                     In United Steelworkers v. Warrior & Gulf Navigation
              Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960), the

                                            11
              Supreme Court of the United States created a strong
              presumption favoring arbitration in contract disputes. The
              court noted that “unless it may be said with positive assurance
              that the arbitration clause is not susceptible of an
              interpretation that covers the asserted dispute,” arbitration
              should not be denied. Id. at 582-83, 80 S.Ct. at 1353, 4
              L.Ed.2d at 1418. Doubts as to whether a particular grievance
              is arbitrable should be resolved in favor of arbitration. Id. at
              583, 80 S.Ct. at 1353, 4 L.Ed.2d at 1418. Specifically, the
              court held that “[i]n the absence of any express provision
              excluding a particular grievance from arbitration, we think
              only the most forceful evidence of a purpose to exclude the
              claim from arbitration can prevail, particularly where . . . the
              exclusion cause is vague and the arbitration clause is quite
              broad.” Id. at 584-85, 80 S.Ct. at 1354, 4 L.E.2d at 1419.

(Footnote and additional citations omitted). This Court held in syllabus point 1 of Transit

Authority:

                     In determining whether or not the parties to a
              collective bargaining agreement have agreed to submit a
              particular dispute to arbitration, it must be recognized that
              there is a presumption favoring arbitration, and this
              presumption may be rebutted only where it can be said with
              positive assurance that the arbitration clause is not susceptible
              of an interpretation that covers the asserted dispute.

              Upon application of the above principles to the arbitration agreement in this

case, we find that the agreement is not ambiguous. The arbitration agreement requires

that claims be submitted for “individual” arbitration. In addition, it provides that “the

arbitrator shall have no authority to arbitrate claims on a class action basis,” and that

claims “may not be joined or consolidated with claims brought by any other person.”

This language plainly indicates that the respondents are precluded from bringing a class

action against Salem. Further, we find it significant that the clause regarding the

                                             12

arbitrator having no authority to arbitrate claims on a class action basis appears in the

same sentence as the clause prohibiting claims from being joined or consolidated. In

addition, the requirement of individual arbitration when read together with the statement

regarding the arbitrator having no authority to arbitrate claims on a class action basis and

the prohibition on joining and consolidating claims clearly demonstrate a waiver of the

right to bring class action litigation. Accordingly, we find that the arbitration agreement

acts as a class action litigation waiver barring the respondents from seeking judicial relief

as a class.

                                   IV. CONCLUSION

              For the reasons stated above, this Court reverses the August 27, 2015, order

of the Circuit Court of Harrison County that denied Salem’s motion to stay proceedings

pending mandatory alternative dispute resolution, and we remand this case to the circuit

court for further proceedings.

                                                                  Reversed and remanded.

                                             13