Schumacher Homes of Circleville v. John and Carolyn Spencer

787 S.E.2d 650, 237 W. Va. 379, 2016 W. Va. LEXIS 515
CourtWest Virginia Supreme Court
DecidedJune 13, 2016
Docket14-0441
StatusPublished
Cited by20 cases

This text of 787 S.E.2d 650 (Schumacher Homes of Circleville v. John and Carolyn Spencer) is published on Counsel Stack Legal Research, covering West Virginia Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schumacher Homes of Circleville v. John and Carolyn Spencer, 787 S.E.2d 650, 237 W. Va. 379, 2016 W. Va. LEXIS 515 (W. Va. 2016).

Opinion

Chief Justice Ketchum:

This case is again before the Court upon a remand from the United States Supreme Court. The case began as an appeal of an order from the Circuit Court of Mason County, and involves an arbitration agreement between a home builder and a home buyer. The circuit court refused to enforce the arbitration agreement after finding it was unconscionable. In a prior opinion, we affirmed the circuit court’s order.

As set forth below, we now reverse the circuit court’s order. Before the circuit court and this Court, the builder argued that language in the arbitration agreement delegated questions about unconscionability to the arbitrator for resolution. The home buyer never specifically challenged the delegation language, before the circuit court or this Court. We find that the home buyer has therefore waived any right to challenge the delegation language. We remand the ease to the circuit court, and direct that the parties’ dispute regarding the validity, revocability, or enforceability of the arbitration agreement be referred to arbitration.

I.

FACTUAL AND PROCEDURAL BACKGROUND

In June 2011, John and Carolyn Spencer (“the plaintiffs”) signed a form contract with defendant Schumacher Homes of Cireleville, Inc. (“Schumacher”), for the construction of a house in Milton, West Virginia. The contract contains an arbitration clause by which the parties agreed, in relevant part, “that any claim, dispute or cause of action, of any nature ... shall be subject to final and binding arbitration by an arbitrator[.]”

Within another part of the arbitration clause is language that Schumacher contends is a “delegation provision” saying that the parties agreed to delegate, from the courts to an arbitrator, any question about the enforceability of the arbitration clause. A delegation provision is a written agreement, nestled within an arbitration clause, to vest the arbitrator with sole authority to resolve any dispute over the validity, revocability or enforceability of the arbitration clause under state contract law. The language in Schu-macher’s form contract comprising the delegation provision states:

The arbitrator(s) shall determine all issues regarding the arbitrability of the dispute.

Nowhere in the contract is the term “arbitra-bility” defined for the parties.

In July 2013, the plaintiffs brought suit against Schumacher in the circuit court claiming that there were defects in the newly-built house. In August 2013, Schumacher filed a motion asking the circuit court to dismiss the plaintiffs’ suit and to compel the plaintiffs to participate in arbitration. Neither Schumacher’s motion nor its legal memorandum supporting the motion made any mention of the delegation provision. The plaintiffs responded to the motion by writing that the court should find that the entire arbitration clause was unconscionable and unenforceable under state contract law.

At a hearing in February 2014, Schumacher asserted for the first time that the arbitration clause contained a delegation provision. Schumacher argued to the circuit court that, because of the delegation language, the court had no power to weigh the unconscionability of the arbitration clause. Schumacher stated that upon invocation of a delegation provision, “that’s really the end of the inquiry” and “[i]t’s for the arbitrator to decide whether [the arbitration clause is] unconscionable.” *385 The plaintiffs, apparently caught off guard, did not mention the delegation language in their oral argument to the circuit court, nor did they seek additional time to respond to Schumacher’s argument. Instead, the plaintiffs’ argument centered solely upon the unconscionable aspects of the arbitration clause.

In an order dated March 6, 2014, the circuit court denied Schumacher’s motion to dismiss and compel arbitration. The circuit court found that, as a whole, the arbitration clause was proeedurally and substantively unconscionable. The circuit court’s order did not address the delegation provision. Schu-macher appealed the circuit court’s order to this Court.

Schumacher’s petition for appeal specifically raised the circuit court’s failure to address the delegation provision. Schumacher asserted that the circuit court had “erred by ruling on questions of arbitrability despite the existence of a provision in the parties’ Arbitration Agreement that vested the arbitrator with authority to determine all issues of arbi-trability relating to the dispute.” 1

The plaintiffs’ response brief, however, did not challenge the delegation provision and, in fact, made no mention of Schumacher’s assertion of the delegation provision. The plaintiffs’ response brief recited the same arguments as the plaintiffs’ brief to the circuit court and focused solely upon “whether the arbitration provision is unenforceable as being unconscionable.” 2

Our opinion in Schumacher Homes of Circleville, Inc. v. Spencer (hereafter “Schu-macher /”) 3 explicated the law of arbitration agreements and delegation provisions under the Federal Arbitration Act (“the FÁÁ”). Under the FAA, the language of a delegation provision must reflect the parties’ clear and unmistakable intention to delegate issues about the validity, -revocability, or enforceability of the arbitration agreement to an arbitrator. 4 We then examined the language of Schumacher’s purported delegation provision and found the word “arbitrability” to be atobiguous; We determined that the circuit Court would have been within its rights not to enforce the delegation language because it “[did] not reflect a clear and unmistakable intent by the parties to delegate state contract law questions about the validity, revoca-bility, or enforceability of the arbitration clause 1 to an arbitrator.” 5

Schumacher then petitioned the United States Supreme Court for a writ of certiora-ri. Schumacher asserted that, under Supreme Court precedent, “a delegation provision contained within an arbitration agreement must be specifically enforced unless the party opposing arbitration specifically challenges the delegation provision.” 6 - In an order issued February 29, 2016, the Supreme Court granted'the writ of certiorari, vacated Schumacher I, and remanded the case back to this Court “for- further consideration in light of [their new opinion in] DIRECTV, Inc. v. Imbwrgia, 577 U.S. t-, 136 S.Ct. 463,193 L.Ed.2d 365 (2015).” 7

Upon remand, we. asked the parties for supplemental briefs that were to “solely and specifically address how the Supreme Court’s decision in DIRECTV, Inc. v. Imburgia affects this Court’s resolution of the issues in this ease.” 8 This was largely because the DIRECTV opinion was decided by the Supreme Court eight months after our opinion in Schumacher

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Bluebook (online)
787 S.E.2d 650, 237 W. Va. 379, 2016 W. Va. LEXIS 515, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schumacher-homes-of-circleville-v-john-and-carolyn-spencer-wva-2016.