The Term In Review: ARBITRATION

The January term brought a string of losses to those fighting against the enforcement of contractual arbitration clauses.

In West Virginia CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., No. 16-0209 (W.Va. 2/9/17), a group of pharmacies sued a network administrator, Caremark, alleging that it had engaged in tortious and fraudulent business practices.  Each of the pharmacies had a written contract with Caremark containing arbitration language.  However, the contracts did not contain a delegation clause–i.e., a clause giving the arbitrator the power to determine threshold issues involving the existence, scope, and validity of their agreement to arbitrate.  Caremark argued that the contract did, however, make reference to the rules of the American Arbitration Association, and that the rules themselves contained delegation language.  The Supreme Court agreed with Caremark, finding this was enough to incorporate the delegation language from the rules into the contracts.

This was followed by Employee Resource Group, LLC v. Harless, No. 16-0493 (W.Va. 4/13/17).  The plaintiff, a manager at a Wendy’s restaurant, addressed an episode of sexual harassment in the workplace.  Thereafter, she was terminated.  The plaintiff sued for violations of West Virginia’s human rights laws; however, her employment contract contained arbitration language.  The plaintiff attacked this language on unconscionability grounds.  Even though the contract was presented to the plaintiff on a take-it-or-leave-it basis and saddled her with attorney fees and costs in specific situations, the Supreme Court found the arbitration agreement to be valid and enforceable.

Within a week after that came Citizens Telecommunications Co. of West Virginia v. Sheridan, No. 16-0005 (W.Va.  4/20/17).  Sheridan was class case alleging that an internet provider, Frontier, had intentionally slowed internet access.  Frontier’s original contract did not contain any arbitration language, but did give Frontier the right “to change prices, terms and conditions.”  Frontier put a notice in one of its billing statements indicating that it had “recently instituted a binding arbitration provision to resolve customer disputes.” Frontier revised the arbitration provision twice after that, each time mailing a notice with a billing statement.  The plaintiffs argued that they had not assented to arbitration and that no additional consideration had been paid.  The Supreme Court rejected these arguments, finding that the arbitration clause was fully enforceable.

The takeaway from these cases is obvious–arbitration is here to stay, and those opposing contractual arbitration clauses face a difficult, uphill climb.  Assent and unconscionability are still the two most effective arguments to make to defeat arbitration language, but even these are becoming longshots.

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