Stonerise Healthcare, LLC v. Susan K. Oates ( 2020 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Stonerise Healthcare, LLC, and
Keyser Center, LLC, d/b/a Piney Valley, FILED
Defendants Below, Petitioners June 16, 2020
released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
vs.) No. 19-0215 (Mineral County 17-C-76) SUPREME COURT OF APPEALS
OF WEST VIRGINIA
Susan K. Oates,
Executrix of the Estate of Donna Wagoner, Deceased,
Plaintiff Below, Respondent
MEMORANDUM DECISION
The petitioners herein, Stonerise Healthcare, LLC, and Keyser Center, LLC, d/b/a
Piney Valley (collectively, “Stonerise”), by counsel Mark A. Robinson and Justin D. Jack,
appeal from an order entered February 8, 2019, by the Circuit Court of Mineral County. In
that order, the circuit court denied Stonerise’s motion to dismiss and compel arbitration of
the claims asserted against it by the respondent herein, Susan K. Oates, Executrix of the
Estate of Donna Wagoner, deceased (“Ms. Oates”), who is represented by Colin M. Esgro.
On appeal to this Court, Stonerise contends that the parties have a valid and binding
arbitration agreement and that the circuit court erred by refusing to enforce the parties’
agreement, dismiss this case, and refer the matter to arbitration.
Upon consideration of the parties’ briefs 1 and the appendix record, this Court
concludes that the circuit court erred by denying Stonerise’s motion to dismiss and by not
referring the parties’ dispute to arbitration as required by their binding arbitration
agreement. Accordingly, we reverse the circuit court’s order and remand this case with
directions to dismiss this matter from the circuit court’s docket and to refer the parties to
arbitration. Because this case does not present a new or significant issue of law, and for
the reasons set forth herein, we find this case satisfies the “limited circumstances”
requirement of Rule 21(d) of the West Virginia Rules of Appellate Procedure and is proper
for disposition as a memorandum decision.
1
Although oral arguments originally were scheduled in this case, the Court’s
declaration of a judicial emergency due to the COVID-19 global pandemic necessitated
their continuance. The parties have agreed to submit this case on their briefs for the Court’s
consideration at this time rather than presenting oral arguments on a later date.
1
The facts giving rise to this appeal began in November 2015 when Ms. Oates’
mother was admitted to Stonerise’s nursing home facility for rehabilitation following a
recent illness. As part of the admissions process, Ms. Oates, who completed her mother’s
paperwork on her behalf as her power of attorney, was presented with an “Arbitration
Agreement,” which is the document at issue in the instant proceeding. During the
proceedings below, a representative of Stonerise testified that she reviewed this document
with Ms. Oates before she signed it, and the document, itself, reflects that acceptance of
the Arbitration Agreement is voluntary and not required for an individual’s admission to
or continued residence at Stonerise. Ms. Oates signed the Arbitration Agreement,
acknowledging her understanding and acceptance of its terms, and the other documents
required for her mother’s admission to Stonerise the day after her mother was transported
to the facility.
Thereafter, Ms. Oates’ mother allegedly suffered injuries while she was a resident
of Stonerise, and Ms. Oates filed a wrongful death action against the facility and associated
entities on August 9, 2017, in the Circuit Court of Mineral County. In response to the
complaint, Stonerise filed a motion to dismiss and compel arbitration contending that,
because Ms. Oates had signed the Arbitration Agreement during her mother’s admissions
process, she was required to resolve any claims relating to her mother’s admission to and
residence at Stonerise to arbitration. Following a hearing, the circuit court denied
Stonerise’s motion, finding the subject Arbitration Agreement to be both procedurally and
substantively unconscionable. From the circuit court’s February 8, 2019 order
memorializing this ruling, Stonerise appeals to this Court.
Although the circuit court’s order denying Stonerise’s motion to dismiss and compel
arbitration is an interlocutory ruling, it nevertheless is properly before the Court in its
present procedural posture. In this regard, we previously have held that “[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). Furthermore, “[w]hen an appeal from an order
denying a motion to dismiss and to compel arbitration is properly before this Court, our
review is de novo.” See Syl. pt. 1, W. Va. CVS Pharmacy, LLC v. McDowell Pharmacy,
Inc., 238 W. Va. 465, 796 S.E.2d 574 (2017).
The instant appeal asks this Court to determine whether the Arbitration Agreement
entered into by the parties during the process of Ms. Oates’ mother’s nursing home
admission is valid and enforceable and, thus, requires Ms. Oates to submit her claims
against Stonerise to arbitration for resolution. During the proceedings below, the circuit
court was tasked with determining the threshold issues of whether the subject Arbitration
Agreement was valid and whether it applied to the claims asserted by Ms. Oates against
Stonerise:
2
“‘When a trial court is required to rule upon a motion to compel
arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 – 307
(2006), the authority of the trial court is limited to determining the threshold
issues of (1) whether a valid arbitration agreement exists between the parties;
and (2) whether the claims averred by the plaintiff fall within the substantive
scope of that arbitration agreement.’ Syl. Pt. 2, State ex rel. TD Ameritrade,
Inc. v. Kaufman, 225 W. Va. 250, 692 S.E.2d 293 (2010).” Syllabus point 4,
Ruckdeschel v. Falcon Drilling Co., L.L.C., 225 W. Va. 450, 693 S.E.2d 815
(2010).
Syl. pt. 2, State ex rel. AMFM, LLC v. King, 230 W. Va. 471, 740 S.E.2d 66 (2013). In
rendering its rulings, the circuit court found that the parties’ Arbitration Agreement was
not enforceable because it is both procedurally and substantively unconscionable. See Syl.
pt. 1, Brown v. Genesis Healthcare Corp., 229 W. Va. 382, 729 S.E.2d 217 (2012)
(“‘Under the Federal Arbitration Act, 9 U.S.C. § 2, 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.’ Syllabus Point 6, Brown v. Genesis Healthcare Corp., 228
W. Va. 646, 724 S.E.2d 250 (2011)[, vacated in part on other grounds sub nom. Marmet
Health Care Ctr., Inc. v. Brown, 565 U.S. 530, 132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012)
(per curiam)].”) (“Brown II”).
Generally speaking,
“[t]he doctrine of unconscionability means that, because of an overall
and gross imbalance, one-sidedness or lopsidedness in a contract, a court may
be justified in refusing to enforce the contract as written. The concept of
unconscionability must be applied in a flexible manner, taking into
consideration all of the facts and circumstances of a particular case.”
Syllabus Point 12, Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724
S.E.2d 250 (2011)[, vacated in part on other grounds sub nom. Marmet
Health Care Ctr., Inc. v. Brown, 565 U.S. 530, 132 S. Ct. 1201, 182 L. Ed. 2d
42 (2012) (per curiam)].
Syl. pt. 4, Brown II, 229 W. Va. 382, 729 S.E.2d 217. Conducting “[a]n analysis of whether
a contract term is unconscionable necessarily involves an inquiry into the circumstances
surrounding the execution of the contract and the fairness of the contract as a whole.” Syl.
pt. 3, Troy Mining Corp. v. Itmann Coal Co., 176 W. Va. 599, 346 S.E.2d 749 (1986).
Moreover, “[a] determination of unconscionability must focus on the relative positions of
the parties, the adequacy of the bargaining position, the meaningful alternatives available
to the plaintiff, and ‘the existence of unfair terms in the contract.’” Syl. pt. 4, Art’s Flower
Shop, Inc. v. Chesapeake & Potomac Tel. Co. of W. Va., Inc., 186 W. Va. 613, 413 S.E.2d
3
670 (1991). Furthermore, “[u]nconscionability is an equitable principle, and the
determination of whether a contract or a provision therein is unconscionable should be
made by the court.” Syl. pt. 1, Troy Mining, 176 W. Va. 599, 346 S.E.2d 749. Thus,
“[i]f a court, as a matter of law, finds a contract or any clause of a
contract to be unconscionable, the court may refuse to enforce the contract,
enforce the remainder of the contract without the unconscionable clause, or
limit the application of any unconscionable clause to avoid any
unconscionable result.” Syllabus Point 16, Brown v. Genesis Healthcare
Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011)[, vacated in part on other
grounds sub nom. Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530,
132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012) (per curiam)].
Syl. pt. 8, Brown II, 229 W. Va. 382, 729 S.E.2d 217.
To determine whether the parties’ Arbitration Agreement is valid and enforceable
under the facts of this case, we must review the agreement and the circumstances
surrounding its execution to ascertain whether it is procedurally and substantively
unconscionable as found by the circuit court.
“A contract term is unenforceable if it is both procedurally and
substantively unconscionable. However, both need not be present to the
same degree. Courts should apply a ‘sliding scale’ in making this
determination: the more substantively oppressive the contract term, the less
evidence of procedural unconscionability is required to come to the
conclusion that the clause is unenforceable, and vice versa.” Syllabus Point
20, Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250
(2011)[, vacated in part on other grounds sub nom. Marmet Health Care
Ctr., Inc. v. Brown, 565 U.S. 530, 132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012)
(per curiam)].
Syl. pt. 9, Brown II, 229 W. Va. 382, 729 S.E.2d 217.
First, we consider procedural unconscionability. In this regard, we previously have
held that
“Procedural unconscionability is concerned with inequities,
improprieties, or unfairness in the bargaining process and formation of the
contract. Procedural unconscionability involves a variety of inadequacies
that results in the lack of a real and voluntary meeting of the minds of the
parties, considering all the circumstances surrounding the transaction. These
inadequacies include, but are not limited to, the age, literacy, or lack of
sophistication of a party; hidden or unduly complex contract terms; the
4
adhesive nature of the contract; and the manner and setting in which the
contract was formed, including whether each party had a reasonable
opportunity to understand the terms of the contract.” Syllabus Point 17,
Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250
(2011)[, vacated in part on other grounds sub nom. Marmet Health Care
Ctr., Inc. v. Brown, 565 U.S. 530, 132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012)
(per curiam)].
Syl. pt. 10, Brown II, 229 W. Va. 382, 729 S.E.2d 217. In reviewing the parties’ Arbitration
Agreement, the circuit court determined that it was procedurally unconscionable. We
disagree. During the admissions process, which occurred one day after Ms. Oates’ mother
became a resident of Stonerise, a representative of the facility explained the admissions
documents to Ms. Oates and specifically addressed the Arbitration Agreement separately
from the ninety-plus page admissions packet. Ms. Oates recounted that, as a retail store
manager during the holiday shopping season, having to take time off from work to
complete her mother’s admissions process was stressful. However, she also stated that
while “[her] mind may have been in chaos . . . [she] c[ould] still handle business.” Ms.
Oates additionally was familiar with arbitration provisions as a result of her employment,
for which she handles new employees’ hiring documents and customers’ consumer credit
card applications, both of which include an arbitration provision in their terms.
Moreover, the first line of text following the designation of the parties to the
Arbitration Agreement specifically states that “this Arbitration Agreement is not a
condition of admission to or continued residence in the facility.” (Emphasis added). The
very next section of the Arbitration Agreement references, in boldface and larger lettering,
the “Voluntary Participation in Arbitration Agreement.” Finally, the agreement further
allows a signatory to the Arbitration Agreement to rescind his or her consent thereto, again
using boldface font for emphasis: “You have the right to consult an attorney prior to or
after executing this Arbitration Agreement, refuse to execute this Arbitration
Agreement, or change your mind within 30 days of execution.” The agreement then
provides an explicit, numbered, three-step, clearly worded explanation of this right of
rescission as well as the ramifications of failure to rescind. Given the repeated references
in the plain language of the Arbitration Agreement indicating that its acceptance was
voluntary and not a condition of a resident’s admission to Stonerise’s facility, as well as
Ms. Oates’ business sophistication and familiarity with arbitration clauses, we cannot find
that the subject Arbitration Agreement was procedurally unconscionable. Cf. Syl. pt. 8,
Rent-A-Center, Inc. v. Ellis, 241 W. Va. 660, 827 S.E.2d 605 (2019) (“‘The omission of an
“opt out” provision in an agreement that permits the signatories to reject arbitration is just
one of multiple factors to consider in evaluating a claim of procedural unconscionability.
As a result, the omission of an “opt out” provision is not in itself sufficient evidence that
an arbitration agreement is grossly unfair and thus unenforceable on grounds of procedural
unconscionability.’ Syllabus Point 2, Nationstar Mortg., LLC v. West, 237 W. Va. 84, 785
S.E.2d 634 (2016).”). Therefore, we reverse the circuit court’s contrary ruling.
5
Finding that the subject Arbitration Agreement is not procedurally unconscionable,
we now consider whether the circuit court erred by determining that the agreement is
substantively unconscionable.
“Substantive unconscionability involves unfairness in the contract
itself and whether a contract term is one-sided and will have an overly harsh
effect on the disadvantaged party. The factors to be weighed in assessing
substantive unconscionability vary with the content of the agreement.
Generally, courts should consider the commercial reasonableness of the
contract terms, the purpose and effect of the terms, the allocation of the risks
between the parties, and public policy concerns.” Syllabus Point 19, Brown
v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011)[,
vacated in part on other grounds sub nom. Marmet Health Care Ctr., Inc. v.
Brown, 565 U.S. 530, 132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012) (per curiam)].
Syl. pt. 12, Brown II, 229 W. Va. 382, 729 S.E.2d 217. We also disagree with the circuit
court’s ruling on this issue.
As noted previously, a resident’s acquiescence to the subject Arbitration
Agreement, itself, is completely optional, and this non-mandatory nature of the agreement
is clearly stated several times on the face of the document, itself. Moreover, during the
process of signing admissions paperwork, Ms. Oates specifically chose not to sign other
optional contracts presented to her by Stonerise, including those providing for beauty shop
treatments and laundry services, consenting to the use of photographs and other images of
her mother, and establishing a resident trust fund account. Thus, it is apparent that the
terms of the Arbitration Agreement were sufficiently clear to alert Ms. Oates to the fact
that agreeing to arbitrate future disputes was voluntary and not required as a condition of
her mother’s admission to or continued residence at Stonerise.
Furthermore, although the Arbitration Agreement specifically names the “National
Arbitration Forum” as the arbitrator, the unavailability of this entity is not fatal to the
agreement’s enforceability.
Where an arbitration agreement names a forum for arbitration that is
unavailable or has failed for some reason, a court may appoint a substitute
forum pursuant to section 5 of the Federal Arbitration Act, 9 U.S.C. § 5
(1947) (2006 ed.), only if the choice of forum is an ancillary logistical
concern. Where the choice of forum is an integral part of the agreement to
arbitrate, the failure of the chosen forum will render the arbitration agreement
unenforceable.
Syl. pt. 3, Front, 231 W. Va. 518, 745 S.E.2d 556. Under the terms of the parties’
agreement, such a choice of arbitration forum is not an essential part of their contract
6
because the Arbitration Agreement specifically provides that “if National Arbitration
Forum is unavailable for any reason, the parties to this Arbitration Agreement agree to
appoint an alternative arbitrator.”
Moreover, the Arbitration Agreement specifically preserves grievance and
compliance reporting rights of an aggrieved resident, again using boldface language for
emphasis: “this Arbitration Agreement does not limit nor prevent the Resident’s right to
file a grievance or complaint[,] formal or informal, with the Facility, the Long-Term Care
Ombudsman, or the West Virginia Office of Health Facility Licensure and Certification
(OHFLAC) or federal equivalent.” Additionally, the “Arbitration Agreement does not
prevent the Resident from requesting an inspection of the Facility from such agency, or
from seeking a review under any applicable federal, state, or local law of any decision to
discharge or transfer the Resident.”
Finally, we also do not find the so-called “loser pays” provision renders the parties’
Arbitration Agreement substantively unconscionable. This term provides in full as
follows:
The Facility agrees to pay for the fees associated with arbitration
which may include but is [sic] not limited [to] case management fees and
professional fees for the arbitrator’s services. The Parties shall bear their
own costs and attorney’s fees except that the arbitrator may, in the award,
allocate all or part of the costs of the arbitration, including the fees of the
arbitrator and the reasonable attorneys’ [sic] fees of the prevailing party.
(Emphasis added). In the main, this provision tracks the established common law of this
State that requires each party to bear his or her own litigation expenses: “As a general rule
each litigant bears his or her own attorney’s fees absent a contrary rule of court or express
statutory or contractual authority for reimbursement.” Syl. pt. 2, Sally-Mike Props. v.
Yokum, 179 W. Va. 48, 365 S.E.2d 246 (1986). Additionally, we have recognized the
existence of a fee-shifting mechanism in certain cases: “[t]here is authority in equity to
award to the prevailing litigant his or her reasonable attorney’s fees as ‘costs,’ without
express statutory authorization, when the losing party has acted in bad faith, vexatiously,
wantonly or for oppressive reasons.” Syl. pt. 3, id. Insofar as the agreement’s quoted
language leaves to the arbitrator’s discretion whether a losing party should be required to
pay the prevailing party’s fees and costs, it is similar to this Court’s recognition that circuit
courts are vested with similar discretion in proceedings litigated in their tribunals.
Therefore, we do not find this provision of the Arbitration Agreement to be substantively
unconscionable, and we reverse the circuit court’s ruling to the contrary.
Having determined that the subject Arbitration Agreement is neither procedurally
nor substantively unconscionable and, thus, is valid and enforceable, we next must consider
whether it applies to the claims that Ms. Oates has brought against Stonerise. See Syl. pt.
7
2, AMFM, 230 W. Va. 471, 740 S.E.2d 66. We find that it does. Pursuant to the express
language of the Arbitration Agreement, any and all claims related to or arising from the
provision of services by Stonerise to the resident signing the Arbitration Agreement are
subject to binding arbitration:
The parties agree that any legal dispute, controversy, demand or claim that
arises out of or relates to the Resident Admission Agreement or any service
or health care provided by this center to the Resident, shall be resolved
exclusively by an Arbitration Agreement process that shall include binding
arbitration, and not by a lawsuit or resort to court process except to the extent
that applicable state or federal law provides for the judicial review of
arbitration proceedings or the judicial enforcement of arbitration awards.
(Emphasis added). Insofar as Ms. Oates asserts that her mother was injured by the actions
of Stonerise and also charges the facility with her mother’s wrongful death while she was
a resident of its facility, such claims clearly come within the ambit of disputes subject to
the Arbitration Agreement.
Given that the parties’ Arbitration Agreement is both valid and enforceable and
applicable to the claims that Ms. Oates has asserted against Stonerise, we reverse the
February 8, 2019 order of the Circuit Court of Mineral County finding to the contrary and
remand this case to the circuit court for the entry of an order granting Stonerise’s motion
to dismiss and enforcing the parties’ arbitration agreement by compelling arbitration.
Reversed and Remanded.
ISSUED: June 16, 2020
CONCURRED IN BY:
Chief Justice Tim Armstead
Justice Elizabeth D. Walker
Justice Evan H. Jenkins
CONCURRING, IN PART; DISSENTING, IN PART; AND WRITING
SEPARATELY:
Justice John A. Hutchison
DISSENTING AND WRITING SEPARATELY:
Justice Margaret L. Workman
8
Hutchison, J., concurring, in part; dissenting, in part; and writing separately:
The problem I have with this case is not that it will be referred to arbitration. My
concern is that the presiding official, who happens to be an arbitrator, will have the totally
unfettered authority to award a huge amount of attorney’s fees, expenses, and arbitration
costs to the prevailing party. The “loser pays” provision in this contract is grossly
unconscionable to unsuspecting individuals such as Ms. Oates.
Unconscionability, which is a state law doctrine applicable to any type of contract,
looks to the “overall and gross imbalance, one-sideness or lop-sideness in a contract[.]”
Syl. Pt. 4, in part, Brown v. Genesis Healthcare Corp., 229 W. Va. 382, 729 S.E.2d 217
(2012) [Brown II]; see also Syl. Pt. 9, Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281,
737 S.E.2d 550 (2012) (“A court in its equity powers is charged with the discretion to
determine, on a case-by-case basis, whether a contract provision is so harsh and overly
unfair that it should not be enforced under the doctrine of unconscionability.”) As a contract
of adhesion, 2 this Arbitration Agreement is subject to “greater scrutiny than a contract with
bargained-for terms to determine if it imposes terms that are oppressive, unconscionable
or beyond the reasonable expectations of an ordinary person.” See Syl. Pt. 11, in part,
Brown II.
A factor critical to this unconscionability analysis is whether the contract would
impose unreasonably burdensome costs upon one of the parties:
Provisions in a contract of adhesion that if applied
would impose unreasonably burdensome costs upon or would
have a substantial deterrent effect upon a person seeking to
enforce and vindicate rights and protections or to obtain
statutory or common-law relief and remedies that are afforded
by or arise under state law that exists for the benefit and
protection of the public, are unconscionable; unless the court
determines that exceptional circumstances exist that make the
provisions conscionable. In any challenge to such a provision,
the responsibility of showing the costs likely to be imposed by
the application of such a provision is upon the party
challenging the provision; the issue of whether the costs would
impose an unconscionably impermissible burden or deterrent
is for the court.
2
“A contract of adhesion is one drafted and imposed by a party of superior strength
that leaves the subscribing party little or no opportunity to alter the substantive terms, and
only the opportunity to adhere to the contract or reject it.” Syl. Pt. 11, in part, Brown II.
9
Syl. Pt. 4, State ex rel. Dunlap v. Berger, 211 W. Va. 549, 567 S.E.2d 265 (2002). Other
factors to be considered include “the nature of the contracting parties” and “the existence
of unfair terms in the contract[.]” Syl. Pt. 3 & 4, Art’s Flower Shop, Inc. v. Chesapeake &
Potomac Telephone Co. of W.Va., 186 W. Va. 613, 413 S.E.2d 670 (1991). As the majority
discusses, our state’s common law recognizes two types of unconscionability. Substantive
unconscionability “involves unfairness in the contract itself and whether a contract term is
one-sided and will have an overly harsh effect on the disadvantaged party.” Syl. Pt. 12, in
part, Brown II. Procedural unconscionability “is concerned with inequities, improprieties,
or unfairness in the bargaining process and formation of the contract. Procedural
unconscionability involves a variety of inadequacies that results in the lack of a real and
voluntary meeting of the minds of the parties, considering all the circumstances
surrounding the transaction.” Syl. Pt. 10, in part, Brown II. After reviewing this Arbitration
Agreement and the appellate appendix record, I am convinced that this “loser pays”
provision is both procedurally and substantively unconscionable with respect to Ms. Oates.
Stonerise, a business that regularly uses arbitration agreements, presented this
prewritten arbitration contract to an individual, Ms. Oates, who was going through the
stressful situation of admitting her mother to a nursing home. The contract was neither
sought by Ms. Oates nor negotiated at arms-length. As an inducement for entering into the
contract, the front page of the Arbitration Agreement promised that binding arbitration
would be “cost-effective[]” for all parties. On a different page, the document provided that
Stonerise would “pay for the fees associated with arbitration which may include but is [sic]
not limited [to] case management fees and professional fees for the arbitrator’s services.”
Next, the document specified that each party would “bear their own costs and attorney’s
fees[.]” Then, the contract backtracked and contradicted the terms that were just set forth.
The drafter of the contract, Stonerise, included a clause saying that the arbitrator “may, in
the award, allocate all or part of the costs of arbitration, including the fees of the arbitrator
and the reasonable attorneys’ fees of the prevailing party.”
In this case, Ms. Oates is seeking to hold Stonerise responsible because she believes
Stonerise negligently cared for her mother’s medical needs, resulting in her mother’s
untimely and wrongful death. If she should lose, she risks being ordered to pay all of the
defense team’s attorney’s fees and costs, all of the arbitrator’s fees, and all of the costs of
the arbitration. In a complicated medical malpractice and wrongful death action such as
this, these fees and expenses will certainly amount to tens of thousands of dollars. If
Stonerise should lose and be ordered to pay Ms. Oates’s attorney’s fees and costs, which
are most likely contingent on the outcome, anyway, it would be business as usual for the
company. If Ms. Oates should lose, this award will have an unreasonably burdensome and
likely devastating financial impact upon her. It is abundantly clear to me that Ms. Oates
would never have agreed to such a risky provision if she had not been deceived with the
promise of “cost-effectiveness” and with the promises that Stonerise would pay the costs
of the arbitration and that the parties would bear their own fees and expenses. Notably,
although this contract term has been dubbed the “loser pays” provision in the course of this
10
litigation, it is not labelled as such in the Arbitration Agreement. It is a small clause, tucked
away in the middle of a page of text, with the potential to be financially ruinous to Ms.
Oates. The impact of this provision is even more burdensome when considering that Ms.
Oates will have no opportunity to appeal any part of the arbitrator’s award. I am convinced
that this “loser pays” provision imposes an unconscionably impermissible burden on her
attempt to vindicate her claims.
The majority acknowledges that the “American Rule,” requiring each litigant to bear
his or her own attorney’s fees and costs, is followed in West Virginia. The majority
nonetheless disregards this rule and Ms. Oates’s arguments about unconscionability by
reasoning that our law also allows a court to award fees and costs when one party has acted
in “bad faith, vexatiously, wantonly or for oppressive reasons.” Critically, however, this
Arbitration Agreement does not limit the arbitrator to only awarding fees and costs in the
event of bad faith, vexatious, wanton, or oppressive conduct. The contract is wholly devoid
of the limitation that the majority relies upon. The arbitrator may award fees and costs
simply because one party loses the case, even if the losing party has acted in the best of
faith. Contrary to the majority’s conclusion, this “loser pays” provision is not similar to our
law.
Under our existing common law, “[a] contract term is unenforceable if it is both
procedurally and substantively unconscionable” although not necessarily to the same
degree. Syl. Pt. 9, in part, Brown II. Because this “loser pays” provision is hidden inside a
contract that otherwise promises to be cost-effective and promises that Ms. Oates would
only be responsible for paying her own fees and costs, I conclude that the provision is
procedurally unconscionable. Because of the unfair and potentially devastating financial
impact that it would have on Ms. Oates if she lost her case, I believe that it is also
substantively unconscionable. As such, it is my opinion that the Court should have deemed
the “loser pays” provision to be unenforceable. “If a court, as a matter of law, finds a
contract or any clause of a contract to be unconscionable, the court may . . . enforce the
remainder of the contract without the unconscionable clause, or limit the application of any
unconscionable clause to avoid any unconscionable result.” Syl. Pt. 8, in part, Brown II. 3
3
I also observe that the requirement for declaring a contract, or a provision therein,
to be unenforceable only if it presents both substantive and procedural unconscionability
is a doctrine fashioned by the Court in Syllabus Point 20, Brown v. Genesis Healthcare
Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011) [Brown I], vacated in part on other grounds
sub nom. Marmet Health Care Center, Inc. v. Brown, 565 U.S. 530 (2012) (per curiam).
As Justice Davis did in Credit Acceptance Corporation v. Front, 231 W. Va. 518, 526 n.8,
745 S.E.2d 556, 564 n.8 (2013), I “question[] the need for establishing both substantive
and procedural unconscionability to find a contractual term is unenforceable.”
11
Accordingly, I respectfully dissent to this memorandum decision to the extent that
it upholds the grossly unfair “loser pays” language in the Arbitration Agreement. However,
I find no error in the remainder of the majority’s analysis, and I concur in the rest of the
decision.
Workman, J., dissenting:
In treating this as just another arbitration case, the majority has followed Lewis
Carroll’s most famous protagonist straight down the rabbit hole. 4 In my view, the validity
of the arbitration clause, signed by respondent Susan K. Oates as attorney-in-fact for her
mother, Donna M. Wagoner, is a moot issue in this case, because an arbitration clause is
not enforceable against the heirs, distributees and/or beneficiaries in a wrongful death
action. This is an issue that was raised but not decided in State ex rel. AMFM, LLC v. King,
230 W. Va. 471, 740 S.E.2d 66 (2013), because in that case this Court concluded that the
decedent’s health care surrogate did not have the authority to sign the arbitration agreement
sought to be enforced. 5 Cf. Williams v. CMO Mgt., LLC, 239 W. Va. 530, 536, 803 S.E.2d
500, 506 (2016) (“An individual with a medical power of attorney does not have the power
to make binding legal decisions for the subject incapacitated person.”). Seven years later,
we have still not decided the issue. It is time to do so. I have earlier expressed my concern
that in many instances, our precedents mandating enforcement of an arbitration clause
against a signatory to the contract are “trump[ing] an individual’s right to a jury trial.” 6 By
4
Alice started to her feet, for it flashed across her mind that she
had never before seen a rabbit with either a waistcoat-pocket,
or a watch to take out of it, and burning with curiosity, she ran
across the field after it, and was just in time to see it pop down
a large rabbit-hole under the hedge. In another moment down
went Alice after it, never once considering how in the world
she was to get out again.
Lewis Carroll, Alice’s Adventures in Wonderland (1865).
5
In relevant part, the West Virginia Health Care Decisions Act, W. Va. Code § 16-
30-3(z) (Repl. Vol. 2011) authorizes a physician or advanced nurse practitioner to identify
an individual as a “health care surrogate” who has the capacity to make health care
decisions on behalf of an incapacitated person.
6
Rent-A-Center, Inc. v. Ellis, 241 W. Va. 660, 676, 827 S.E.2d 605, 621 (2019)
(Workman, J., concurring) (citing Emp. Res. Grp., LLC v. Harless, No. 16-0493, 2017 WL
1371287, at *7 (W. Va. April 13, 2017) (memorandum decision) (Workman, J.,
concurring) and Salem Int’l Univ., LLC v. Bates, 238 W. Va. 229, 236-37, 793 S.E.2d 879,
886-87 (2016) (Workman, J., concurring)).
12
mandating enforcement of an arbitration clause against individuals who neither signed the
contract nor were third-party beneficiaries to it, the majority in the instant cases has gone
so much further, definitely crossing the constitutional line.
For purposes of this dissent, I will assume that Ms. Oates had the authority to sign
an arbitration clause as attorney-in-fact for her mother, although the specific provisions
contained in Paragraph 17 of her Power of Attorney, entitled “To Arrange For My Medical
Care,” do not provide such authority. However, the broad grant of powers contained in
Paragraph 2, “Purposes of this Power of Attorney,” would seem to grant Ms. Oates the
authority to sign anything on behalf of Ms. Wagoner. 7 I will also assume that the
arbitration clause at issue is neither substantively nor procedurally unconscionable,
although Justice Hutchison makes a persuasive argument in his separate concurring and
dissenting opinion that the possibility of a “loser pays” arbitration renders the arbitration
clause unconscionable and therefore unenforceable. 8 This brings us to what should be the
dispositive issue in this case: whether the arbitration clause is enforceable against the
decedent’s heirs, distributees and/or beneficiaries (hereinafter collectively “the
beneficiaries”) in a wrongful death action.
7
The relevant language in the document provided:
I intend that my attorney in fact shall have the power to
exercise or perform any act, power, duty, right or obligation
whatsoever that I now have, or may hereafter acquire the legal
right, power, or capability to exercise or perform, in connection
with, arising from or relating to any person, item, transaction,
thing, business, property, real or personal, tangible or
intangible, or matter whatsoever.
8
The majority’s riposte to Justice Hutchison’s argument is that the discretion vested
in the arbitrator is similar to that vested in the circuit courts to “award to the prevailing
litigant his or her reasonable attorney’s fees as ‘costs’ . . . when the losing party has acted
in bad faith, vexatiously, wantonly or for oppressive reasons.” Syl. Pt. 3, in part, Sally-
Mike Props. v. Yokum, 179 W. Va. 48, 365 S.E.2d 246 (1986). This reasoning is wholly
specious. The possibility of an award of attorney fees to the prevailing litigant is
specifically noted by the Court to be based upon “authority in equity,” id. at 49, 365 S.E.2d
at 247, and the Court cites no authority whatsoever for the proposition that common law
equitable principles apply in any way to arbitration proceedings. Further, the Court ignores
the critical distinction between an award of attorney fees by a judge, pursuant to Sally-
Mike, and an award of such fees by an arbitrator: the former is reviewable by an appellate
court, while the latter is not. Indeed, it is somewhat ironic that the majority rests its
argument on Sally-Mike, where the circuit judge refused to award attorney fees and this
Court affirmed on appeal, citing myriad reasons for the refusal of most American courts to
adopt the English “loser pays” system.
13
In my view, the answer to this question must be no, for three separate but equally
compelling reasons which I will discuss at more length. First, an arbitration clause signed
by the decedent or his or her attorney-in-fact is an agreement to arbitrate the decedent’s
claims and determine what compensation, if any, is owed to the decedent (or, in a survival
action, to the decedent’s estate). In contrast, a cause of action for wrongful death is a claim
that was never held by the decedent; the claim belongs solely to the decedent’s
beneficiaries, to compensate them for their losses arising from the decedent’s death, not
for any losses suffered by the decedent during his or her lifetime. Second, it is well
established that any agreement to arbitrate must be construed pursuant to general contract
principles. See, e.g., State ex rel. U-Haul Co. of W. Va. v. Zakaib, 232 W. Va. 432, 752
S.E.2d 586 (2013), where we explained that “the purpose of the [Federal Arbitration] Act
‘is for 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.’”
Id. at 439, 752 S.E. at 593 (citing Syl. Pt. 7, in part, Brown ex rel. Brown v. Genesis
Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011)). In that regard, “it is a central
rule of contract law is [sic] that ‘[a] party generally cannot be forced to participate in an
arbitration proceeding unless the party has, in some way, agreed to participate.’” Bayles v.
Evans, No. 18-0871, 2020 WL 1982894, at *6 (W. Va. Apr. 24, 2020) (memorandum
decision) (citing Chesapeake Appalachia, L.L.C. v. Hickman, 236 W. Va. 421, 439, 781
S.E.2d 198, 216 (2015)). Here, as in any wrongful death case, the decedent’s beneficiaries
were not parties to the agreement between Ms. Wagoner and Stonerise Healthcare, LLC
(“Stonerise”), and therefore never agreed to arbitrate anything. Further, they were not
third-party beneficiaries to the agreement, as they derived no benefit whatsoever from it.
Finally, although Ms. Oates, who signed the agreement, had the authority to bind Ms.
Wagoner, pursuant to her general power of attorney, she did not have the authority to bind
third parties. Third, any finding that wrongful death heirs can be bound by an agreement
to arbitrate, signed by someone who is not legally authorized to act on their behalf, would
without question violate their rights under the West Virginia Constitution, art. III, §§ 10
and 17.
I begin by reviewing our relevant precedents concerning the nature of a wrongful
death case, which, as this Court has noted on multiple occasions, is purely statutory. See
McDavid v. U.S., 213 W. Va. 592, 596-97, 584 S.E.2d 226, 230-31 (2003) (discussing the
genesis of wrongful death statutes in many states, including West Virginia, as a response
to the harsh common law rule that prohibited recovery for the death of an individual). 9 As
we recently observed,
9
“At common law, no cause of action existed to recover damages for the wrongful
death of another, and a cause of action abated at the death of the injured party. Thus, ‘it
was cheaper for the defendant to kill the plaintiff than to injure him.’” Carter v. SSC Odin
Operating Co., LLC, 976 N.E.2d 344, 353-54 (Ill. 2012) (citations omitted).
14
[a]s no right of action for death by a wrongful act existed at
common law, the right or cause of action for wrongful death,
if maintainable, exists under and by virtue of the provisions of
the wrongful death statute of this State, Sections 5 and 6,
Article 7, Chapter 55, Code, 1931, as amended.
Michael v. Consolidation Coal Co., 241 W. Va. 12, 749, 754, 828 S.E.2d 811, 816 (2019)
(citing Baldwin v. Butcher, 155 W. Va. 431, 433, 184 S.E.2d 428, 429 (1971)). Further,
and critically, “[t]he essential, beneficial purpose of the wrongful death act is ‘to
compensate the beneficiaries for the loss they have suffered as a result of the decedent’s
death.’” Bradshaw v. Soulsby, 210 W. Va. 682, 687, 558 S.E.2d 681, 686 (2001) (citing
White v. Gosiene, 187 W. Va. 576, 582, 420 S.E.2d 567, 573 (1992)).
The damages which a jury may award to the heirs in a wrongful death action
shall include, but may not be limited to, damages for the
following: (A) Sorrow, mental anguish, and solace which may
include society, companionship, comfort, guidance, kindly
offices and advice of the decedent; (B) compensation for
reasonably expected loss of (i) income of the decedent, and (ii)
services, protection, care and assistance provided by the
decedent; (C) expenses for the care, treatment and
hospitalization of the decedent incident to the injury resulting
in death; and (D) reasonable funeral expenses.
W. Va. Code § 55-7-6(c)(1); accord Strum v. Swanson, 221 W. Va. 205, 209-10, 653
S.E.2d 667, 671-72 (2007). 10 That the damages in a wrongful death case belong to the
heirs, not to the decedent’s estate, has been established in this Court’s jurisprudence for
more than a century. Thompson & Lively v. Mann, 65 W. Va. 648, __, 64 S.E. 920, 922
(1909). In this regard, the personal representative of the decedent in a wrongful death case
10
In McDavid, we held that the “may not be limited to” language in the statute
authorized the recovery of damages in a wrongful death action that could previously have
been recovered only in a survival action. 213 W. Va. at 602-04, 584 S.E.2d at 236-38. In
my view, this case was wrongly decided, for the reasons set forth in the dissenting opinion.
The Legislature has enacted three statutory causes of action for the recovery of damages
suffered by the decedent during his or her lifetime: West Virginia Code § 55-7-8, which
authorizes the revival of a previously instituted action for decedent’s damages and injuries,
where such damages and injuries resulted in death; West Virginia Code § 55-7-8a(b),
which authorizes the revival of a previously instituted action for decedent’s damages and
injuries, where such damages and injuries did not result in death; and West Virginia Code
§ 55-7-8a(c), which authorizes the institution of an action for decedent’s damages and
injuries, where such damages and injuries did not result in death.
15
“has a fiduciary obligation to the beneficiaries . . . [and] any recovery passes to the
beneficiaries designated in the wrongful death statute and not to the decedent’s estate.”
Ellis v. Swisher ex rel. Swisher, 230 W. Va. 646, 650, 741 S.E.2d 871, 875 (2013)
(emphasis added and citations omitted).
In syllabus point four, in part, of Davis v. Foley, 193 W. Va. 595, 457 S.E.2d 532
(1995), this Court held that “[t]he damages in a wrongful death action arise out of the death
of the decedent thereby making a wrongful death action a derivative claim.” Accord,
Dairyland Ins. Co. v. Westfall, 199 W. Va. 334, 338, 484 S.E.2d 217, 221 (1997); see Strum
v. Swanson, 221 W. Va. 205, 216, 653 S.E.2d 667, 678 (2007) (emphasizing that the
language of the wrongful death statute permits recovery “where the wrongful act ‘is such
as would (if death had not ensued) have entitled the party injured to maintain an action to
recover damages.’ W. Va. Code § 55-7-5.”) Just what the term “derivative claim” meant
in those cases, and what it means today, is not entirely clear, in light of our longstanding
admonition that West Virginia’s wrongful death statute “clearly created a new right of
action and operated for the benefit, not of the decedent’s estate, but of his distributees.”
Burgess v. Gilchrist, 123 W. Va. 727, __, 17 S.E.2d 804, 806 (1941). In this regard, Davis
and its progeny have been the subject of some debate in federal court litigation. In Bell ex
rel. Bell v. Board of Education of County of Fayette, 290 F. Supp. 2d 701 (S.D.W. Va. 2003),
Judge Haden acknowledged the relevant language in Davis but declined to follow it to its
logical conclusion, holding that a wrongful death claim could not be based upon the civil
rights claim the decedent could have brought during his lifetime. Id. at 708-09. Two years
later, in Wickline v. United States, No. Civ.A.5:05-0024, 2005 WL 2897050 (S.D.W. Va.
2005), Judge Faber also acknowledged the relevant language in both Davis and Westfall,
but declined to follow them on the ground that “these cases are primarily concerned with
insurance issues.” Id. at *3.
I mention these latter cases because the question of whether a wrongful death claim
is a derivative action is relevant, at least in some jurisdictions that have considered the
issue, to whether the decedent’s beneficiaries are bound by an arbitration clause signed by
the decedent or the decedent’s attorney-in-fact. See text infra. In my view, our precedents
counsel that the claim is derivative only in the sense that, as most recently formulated by
this Court, “[w]hile the real cause of action is the negligent injury, it is not committed until
it result in death, and then the action accrues to the administrator, and not until then.”
Michael, 242 W. Va. at 756, 828 S.E.2d at 818 (citing Hoover’s Adm’r v. Chesapeake &
Ohio Ry. Co., 46 W. Va. 268, 271, 33 S.E. 234, 225 (1899). This view is buttressed by the
fact that while wrongful death claims are brought pursuant to a specific grant of statutory
authority, W. Va. Code § 55-7-5, survival claims are brought pursuant to specific grants of
totally separate statutory authority. See W. Va. Code § 55-7-8 (revival of action brought
for injuries that ultimately resulted in plaintiff’s death), and W. Va. Code §§ 55-7-8a(b) &
(c) (revival or institution, respectively, of action for injuries that did not result in death).
In short, wrongful death claims are not derivative of any claim held by the decedent during
his or her lifetime. As cogently expressed in Panagopoulous v. Martin, 295 F. Supp. 220,
16
222 (S.D.W. Va. 1969), “other statutes, including West Virginia’s, have been patterned
after an English statute known as the Lord Campbell’s Act and contemplate the creation of
an entirely new cause of action for wrongful death based upon the loss sustained by certain
persons designated as the beneficiaries of the recovery rather than upon an injury suffered
by the deceased’s estate.” (Emphasis added.) This language was quoted by Judge Faber
in Wickline, to demonstrate the contrast between the wrongful death statutes in West
Virginia and Virginia; in the latter, Judge Faber explained, “Virginia’s wrongful death
statute does not create a new cause of action, but only a right of action in a personal
representative to enforce decedent’s claim for any personal injury that caused death.” 2005
WL 2897050, at *4.
In summary, the very nature of a wrongful death claim – a statutory cause of action
created for the express benefit of a decedent’s heirs, to compensate them for their losses
and damages – compels the conclusion that the heirs cannot be bound by an agreement
signed by or on behalf of the decedent. Such an agreement may well be binding in any
survival action brought on behalf of the decedent’s estate, see note 7 and text infra, but
neither logic nor law permits it to be binding on those asserting a cause of action that the
decedent never held.
I turn now to general contract principles. As previously noted, “[n]othing in the
Federal Arbitration Act . . . overrides normal rules of contract interpretation.” U-Haul, 232
W. Va. at 439, 752 S.E.2d at 593 (citation omitted); see also AMFM, 230 W. Va. at 478,
740 S.E.2d at 73 (“to be valid, an arbitration agreement must conform to the rules
governing contracts, generally.”). In this regard, this Court has held that “[a] party
generally cannot be forced to participate in an arbitration proceeding unless the party has,
in some way, agreed to participate.” Chesapeake Appalachia, 236 W. Va. at 439, 781
S.E.2d at 216 (emphasis added). 11 Therefore, the question is: can the wrongful death
beneficiaries be said to have “agreed to participate” in arbitration, where the arbitration
clause is contained in a contract that they have never even seen, let alone signed? The
answer is no.
Under established contract principles as set forth in our precedents, I cannot
conceive of a reasonable argument that the wrongful death beneficiaries in this case were
bound by an arbitration agreement signed by Ms. Oates as attorney-in-fact for Ms.
Wagoner. First, Ms. Oates had a general power of attorney which authorized her to act
only on behalf of her mother, Ms. Wagoner, not on behalf of the wrongful death
beneficiaries. Second, the wrongful death beneficiaries were not third-party beneficiaries
to the arbitration agreement, notwithstanding Stonerise’s attempt to bind them to its form
agreement by categorizing Ms. Wagoner as “the resident,” and then defining that term as
encompassing everyone “whose claim is or may be derived through or on behalf of the
This is more than a general principle; we have termed it “a central rule of contract
11
law.” Bayles, 2020 WL 1982894, at *6 (emphasis added).
17
Resident, including any next of kin, including that of any parent, spouse, child, executor,
administrator, legal representative, beneficiary, or heir of the Resident, and any person who
has executed this Agreement on the Resident’s behalf.” As the Supreme Court of Kentucky
drolly noted, when presented with a similar argument,
as interesting as life might be if we could bind one another to
contracts merely by referring to each other in them, we are not
persuaded that a non-signatory who receives no substantive
benefit under a contract may be bound to the contract’s
procedural provisions, including arbitration clauses, merely by
being referred to in the contract.
Ping v. Beverly Enters., Inc., 376 S.W.2d 581, 599 (Ky. 2012).
The bottom line here is that the wrongful death beneficiaries received no benefit
whatsoever from the contract between Stonerise and Ms. Wagoner; I cannot conceive of
any reasonable argument that a restriction on their choice of forum is a “benefit.” Further,
the beneficiaries could neither have sued on their own behalf for a breach of the contract,
nor sued to recover damages for any injury or harm sustained by Ms. Wagoner. See
generally Woodford v. Glenville State Coll. Hous. Corp., 159 W. Va. 442, 448, 225 S.E.2d
671, 674 (1976) (in order for a contract concerning a third party to give rise to an
independent cause of action in the third party, it must have been made for the third party’s
sole benefit.”) (citations omitted). Finally, there is nothing in the record from which it
could be inferred that the beneficiaries somehow agreed to participate in arbitration.
Chesapeake Appalachia, 236 W. Va. at 439, 781 S.E.2d at 216. Accordingly, the
beneficiaries were not parties to the arbitration agreement and cannot be bound by it.
Indeed, Ms. Oates herself cannot be deemed a party to the arbitration agreement for
purposes of determining whether it governs this wrongful death action, because she signed
the document solely as an agent for, and on behalf of, Ms. Wagoner. This Court has
explained that,
[w]here an agent, within the scope of his actual or apparent
authority, and acting for and on behalf of his disclosed
principal, makes a contract to pay plaintiff commissions for his
services in bringing about a meeting between the agent and the
owner of certain timber which the principal desires to
purchase, and, in consequence of which meeting, the agent
procures such timber for his principal, such contract is deemed
to be that of the principal, and the agent is not bound by it,
unless his conduct or his express promise evinces an intention
that he shall be bound personally.
18
Syllabus, in part, Davis v. Fisher, 90 W. Va. 417, 111 S.E. 155 (1922). As another court
has summed up the rule, a person “who signs an agreement as the agent of a fully disclosed
principal is not a party to that agreement.” Estate of Decamacho ex rel. Guthrie v.
LaSolana Cre & Rehab. Inc., 316 P.3d 607, 611 (Ariz. Ct. App. 2014). Ms. Oates’ power
of attorney gave her the authority to bind Ms. Wagoner, in any action brought during Ms.
Wagoner’s lifetime, and Ms. Wagoner’s estate, in a survival action. 12 However, Ms. Oates
was not a party personally to the agreement and was not bound by it in her wholly separate
capacity as personal representative appointed pursuant to W. Va. Code § 55-7-6(a). 13
Finally, I turn to an issue which has troubled me in other arbitration cases, 14 but is
squarely at issue here: whether holding wrongful death beneficiaries to an arbitration clause
that they have never seen, never signed, and from which they derive no benefit, violates
their rights under West Virginia Constitution, art. III, § 10 and/or West Virginia
Constitution, art. III, § 17. In my view, this is an easy call; by depriving theses beneficiaries
of the right to have their claims adjudicated by a jury of their peers, in circuit court
proceedings conducted pursuant to the rule of law, with the additional protection of
appellate review to correct any errors, the majority has stripped them of constitutional
protections which have, before today, been jealously guarded by this Court.
I begin with West Virginia Constitution, article III, section 10, which succinctly
provides that “[n]o person shall be deprived of life, liberty, or property, without due process
of law, and the judgment of his peers.” In this regard, we have held that,
[t]o have a property interest, an individual must demonstrate
more than an abstract need or desire for it. He must instead
have a legitimate claim of entitlement to it under state or
federal law. Additionally, the protected property interest is
present only when the individual has a reasonable expectation
12
See text infra.
13
West Virginia Code § 55-7-6(a) provides, in relevant part, that
[e]very such [wrongful death] action shall be brought by and
in the name of the personal representative of such deceased
person who has been duly appointed in this state, or in any
other state, territory or district of the United States, or in any
foreign country, and the amount recovered in every such action
shall be recovered by said personal representative and be
distributed in accordance herewith.
14
See infra note 3.
19
of entitlement deriving from the independent source.” Syllabus
Point 6, State ex rel. Anstey v. Davis, 203 W. Va. 538, 509
S.E.2d 579 (1998).
Collins v. City of Bridgeport, 206 W. Va. 467, 470, 525 S.E.2d 658, 661 (1999) (emphasis
added); see also Goldstein v. Peacemaker Props., LLC, 241 W. Va. 720, 729, 828 S.E.2d
276, 285 (2019) (“[a]n accrued legal claim is a vested property right.”). The wrongful
death beneficiaries’ property interest is not only reasonable, but statutorily concrete:
pursuant to W. Va. Code §§ 55-7-5 & 6(a) – (c), they have a specific entitlement to recover
damages for their losses occasioned by the death of the decedent. 15 See, e.g., Syl. Pt. 3,
Waite v. Civil Serv. Comm’n, 161 W. Va. 154, 241 S.E.2d 164 (1977) (“A property interest
includes not only the traditional notions of real and personal property, but also extends to
those benefits to which an individual may be deemed to have a legitimate claim of
entitlement under existing rules or understandings.”). Holding the beneficiaries to the
provisions of an arbitration agreement which they have never signed, and to which they
are neither parties nor third party beneficiaries, deprives them of due process of law. As
the Pennsylvania Superior Court cogently explained in Pisano v. Extendicare Homes, Inc.,
77 A.3d 651 (Pa. Super. Ct. 2013),
[f]urthermore, as Appellee noted, compelling arbitration upon
individuals who did not waive their right to a jury trial would
infringe upon wrongful death claimants' constitutional rights.
This right, as preserved in the Seventh Amendment of the
United States Constitution, ‘is enshrined in the Pennsylvania
Constitution,’ and ‘the constitutional right to a jury trial, as set
forth in PA. CONST. art. 1, § 6, does not differentiate between
civil cases and criminal cases.’ Bruckshaw v. Frankford
Hospital of City of Philadelphia, 58 A.3d 102, 108-109 (Pa.
2012). Denying wrongful death claimants this right where they
did not waive it of their own accord would amount to this Court
placing contract law above that of both the United States and
Pennsylvania Constitutions. Commonwealth v. Gamble, 62 Pa.
343, 349 (1869) (‘But that the legislature must act in
subordination to the Constitution needs no argument to
prove....’).
Pisano, 77 A.3d at 661-62 (2013) (emphasis added).
This Court’s precedents dictate that we reach the same result in the instant case.
First, a principle enshrined in our jurisprudence is that “[t]he provisions of the Constitution
See text supra, listing the types of damages which may be awarded by a jury in a
15
wrongful death action pursuant to West Virginia Code § 55-7-6(c)(1).
20
of the State of West Virginia may, in certain instances, require higher standards of
protection than afforded by the Federal Constitution.” Syl. Pt. 2, Pauley v. Kelly, 162 W.
Va. 672, 255 S.E.2d 859 (1979). Consistent with that principle, “[a]lthough our due
process clause does not significantly differ in terms of its language from the Fifth and
Fourteenth Amendments to the federal constitution, this Court has ‘determined repeatedly
that the West Virginia Constitution’s due process clause is more protective of individual
rights than its federal counterpart.’” Women’s Health Ctr. of W. Va., Inc. v. Panepinto,
191 W. Va. 436, 442, 446 S.E.2d 658, 664 (1993) (footnote and internal citation omitted).
Accordingly, the United States Supreme Court’s determination that the Federal Arbitration
Act, 9 U.S.C. §§ 1 - 307, survives constitutional challenge under the United States
Constitution, does not require this Court to march in lockstep when enforcement of an
arbitration provision would clearly infringe upon state constitutional rights. Second, with
respect to those state constitutional rights, I cannot accept the proposition that West
Virginia citizens do not enjoy the same due process rights under the West Virginia
Constitution, article III, section 10, as Pennsylvania citizens do under Pennsylvania
Constitution, article I, section 6.
I believe that a recent decision of the United States Supreme Court, albeit in a
different context, provides guidance as to the resolution of this issue. In Wellness
International Network, Ltd. v. Sharif, 135 L. Ed. 2d 1932 (2015), the issue before the Court
was whether adjudication of claims in bankruptcy court violated the longstanding precept
that “‘in general, Congress may not withdraw from’ the Article III courts ‘any matter
which, from its nature, is the subject of a suit at the common law, or in equity, or in
admiralty.’” Id. at 1939 (citation omitted). The Court held that the bankruptcy court could
constitutionally adjudicate claims by consent of the parties, noting that “[a]djudication by
consent is nothing new.” Id. at 1942. In that regard, however, “a litigant’s consent, whether
express or implied, must still be knowing and voluntary.” Id. at 1948.
The relevance of Wellness to the case at bar is readily apparent. Pursuant to West
Virginia Constitution, article III, section 10, the alleged deprivation of a citizen’s property
rights is to be adjudicated by a jury of his or her peers, i.e., in a court proceeding, not in an
administrative forum. Although the citizen may consent to adjudication by an arbitrator,
that consent must be knowing and voluntary. Where, as here, the beneficiaries never
consented to arbitration, either expressly or tacitly, they cannot constitutionally be deprived
of their right to have their claims decided in court.
An examination of West Virginia Constitution, article. III, section 17, requires a
similar analysis and yields the same result. That provision guarantees that “[t]he courts of
this State shall be open, and every person, for an injury done to him, in his person, property
or reputation, shall have remedy by due process of law; and justice shall be administered
without sale, denial or delay.” In construing the scope of article III, section 17, we have
held that,
21
[t]here is a presumption of constitutionality with regard to
legislation. However, when a legislative enactment either
substantially impairs vested rights or severely limits existing
procedural remedies permitting court adjudication of cases,
then the certain remedy provision of Article III, Section 17 of
the West Virginia Constitution is implicated.
Syl. Pt. 6, Gibson v. W. Va. Dep't of Highways, 185 W. Va. 214, 406 S.E.2d 440 (1991),
modified on other grounds Neal v. Marion, 222 W. Va. 380, 664 S.E.2d 721 (2008). 16 In
the instant case, requiring the wrongful death beneficiaries to engage in binding arbitration
would do more than substantially impair or severely limit their rights to have a judge and
jury decide their case; it would wholly eliminate those rights. In this regard, the end result
is the same as the result under an article III, section 10 due process analysis: where, as here,
the beneficiaries never consented to arbitration, either expressly or tacitly, they cannot
constitutionally be deprived of their right to court proceedings where they will “have
remedy by due course of law.” W. Va. Const., art. III, § 17.
The issue raised in this case, whether an arbitration agreement signed by the
decedent’s attorney-in-fact is binding on the beneficiaries in a subsequent wrongful death
action, has been considered by the courts in a number of jurisdictions. Although there is a
split of authority, the better-reasoned cases have held, utilizing some or all of the analyses
set forth supra, that the heirs in a wrongful death action are not bound by an arbitration
agreement signed by or on behalf of the decedent. See, e.g., Carter, 976 N.E.2d at 360
(“Plaintiff, as [the decedent’s] personal representative in the wrongful-death action, is
merely a nominal party, effectively filing suit as a statutory trustee on behalf of the next of
kin. Plaintiff is not prosecuting the wrongful-death claim on behalf of [the decedent], and
thus plaintiff is not bound by [the decedent’s] agreement to arbitrate for purposes of this
cause of action.”) (citation omitted); Ping, 376 S.W.2d at 599 (wrongful death heirs are not
bound by arbitration clause, notwithstanding that clause purports to bind them by mere
expedient of listing them); Lawrence v. Beverly Manor, 273 S.W.3d 525, 529 (Mo. 2009)
(en banc) (“A claim for wrongful death is not derivative from any claims Dorothy
Lawrence might have had, and the damages are not awarded to the wrongful death plaintiffs
on Dorothy Lawrence's behalf. The arbitration agreement, therefore, cannot bind parties to
the wrongful death suit”); Peters v. Columbus Steel Castings Co., 873 N.E.2d 1258, 1262
(Ohio 2007) (“[The decedent] could not restrict his beneficiaries to arbitration of their
wrongful-death claims, because he held no right to those claims; they accrued
16
The issue in Gibson was the constitutionality of a legislatively enacted statute of
repose that insulated architects and builders from liability after the passage of ten years.
185 W. Va. at 216, 406 S.E.2d at 442. We determined that the ten year time limit for
instituting a civil action in court was a reasonable time limit which did not substantially
impair the plaintiff’s rights or limit his remedies within the meaning of West Virginia
Constitution, article III, section 17. Id. at 225, 406 S.E.2d at 451.
22
independently to his beneficiaries for the injuries they personally suffered as a result of the
death.”); Boler v. Sec. Health Care, LLC, 336 P.3d 468, 477 (Okla. 2014) (“We agree with
the courts that have held that a decedent cannot bind the beneficiaries to arbitrate their
wrongful death claim. Oklahoma's Wrongful Death Act created a new cause of action for
pecuniary losses suffered by the deceased's spouse and next of kin by reason of his or her
death. Recovery under the wrongful death act does not go to the estate of the deceased, but
inures to the exclusive benefit of the surviving spouse and children or next of kin.”); Bybee
v. Abdulla, 189 P.3d 40, 50 (Utah 2008) (decedent’s heirs are not third-party beneficiaries
of agreement containing arbitration clause, and thus, “In keeping with the requirement that
an intended third-party beneficiary directly benefit from the contract, the presence of an
arbitration clause in a contract that does not directly benefit a litigant cannot estop him
from proceeding in court.”) (citation omitted); 17 Estate of Decamacho ex rel. Guthrie,
316 P.3d at 615 (“ the statutory beneficiaries are not required to arbitrate their wrongful
death claims against La Solana pursuant to the arbitration clause of the admission
agreement.”); Monschke v. Timber Ridge Assisted Living, 197 Cal. Rptr. 3d 921, 924 (Cal.
Ct. App. 2016) (“‘Because [the plaintiff] signed the residency agreement solely as [the
decedent]'s agent and not in her personal capacity, there is no basis to infer that [the
plaintiff] agreed to arbitrate her wrongful death claim.”) (citation omitted); Futurecare
Northpoint, LLC v. Peeler, 143 A.3d 191, 203 (Md. Ct. Spec. App. 2016) (“But this case
does not concern a survival claim. An action under Maryland’s wrongful death statute is
separate, distinct, and independent from a survival action, even when those actions arise
out of a common tortious act.”); Pisano, 77 A.3d at 661-62 (“compelling arbitration upon
individuals who did not waive their right to a jury trial would infringe upon wrongful death
claimants’ constitutional rights.”); Woodall v. Avalon Care Center-Fed. Way, LLC, 231
P.3d 1252, 1258 (Wash. Ct. App. 2010) (“the court correctly denied the motion to the extent
of the wrongful death claims asserted by the heirs against Avalon. These claims are
exclusively for the benefit of the heirs. The wrongful death statutes ‘create new causes of
action’ meant to compensate surviving relatives ‘for losses caused to them by the
decedent’s death.’ No benefits of a wrongful death claim flow to the estate. Nor did the
cause of action ever belong to the decedent.”) (citations and footnotes omitted).
Although courts in some other jurisdictions have come to a contrary conclusion,
many have done so because their wrongful death statutes are wholly derivative in nature,
i.e., they do not create new, independent causes of action. E.g., Ballard v. Southwest
Detroit Hospital, 327 N.W.2d 370, 371-72 (Mich. Ct. App. 1982), where the court noted
that
17
In a terse rejoinder to the defendant’s argument that a wrongful death heir was a
third-party beneficiary to the contract containing the arbitration clause, the court noted that
“[t]he district court did not apprehend Dr. Abdulla’s attempt to restrict Mrs. Bybee’s choice
of forum as a benefit, nor do we.” Bybee, 189 P.3d at 49. The logic of this statement is
inescapable.
23
[a]lthough the Michigan wrongful death act provides for
additional damages benefitting the decedent's next of kin for
loss of society and companionship, it does not create a separate
cause of action independent of the underlying rights of the
decedent. Rather, the cause of action is expressly made
derivative of the decedent’s rights. Therefore, in the instant
case, the personal representative is bound by the arbitration
agreement to the same extent the decedent would have been
bound had she survived.
(Citation omitted.) See also Laizure v. Avante at Leesburg, Inc., 109 So. 3d 752, 761-62 &
n. 3 (Fla. 2013); Cleveland v. Mann, 942 So. 2d 108, 118-19 (Miss. 2006); In re Labatt
Food Serv., L.P., 279 S.W.3d 640, 647 (Tex. 2009). As discussed supra, this rationale is
not applicable in West Virginia, where our wrongful death statute, W. Va. Code § 55-7-5,
“clearly created a new right of action and operated for the benefit, not of the decedent’s
estate, but of his distributees.” Burgess, 123W. Va. at __, 17 S.E.2d at 806.
Other courts have held that wrongful death beneficiaries are bound by an arbitration
clause because to hold otherwise would undermine legislative intent that all medical
malpractice claims may be subject to arbitration agreements, Ruiz v. Podolsky, 237 P.3d
584, 593 (Cal. 2010); because there is “a strong presumption in favor of arbitration,” Allen
v. Pacheco, 71 P.3d 375, 379 (Colo. 2003); and because the gravamen of a wrongful death
complaint is tortious conduct which resulted in the decedent’s death, the decedent’s
representative “in effect stands in the shoes of the decedent.” Ballard, 327 N.W.2d at 371.
These rationales are wholly unpersuasive, tied as they are to the peculiarities of Missouri,
Colorado and/or Michigan law. Once again, I refer to the detailed and thoughtful analysis
in Futurecare, where the Court of Special Appeals of Maryland analyzed these cases and
concluded:
In summary, Maryland law does not possess the material
features of the legal regimes that have led courts from other
states to require wrongful death claimants to arbitrate based on
a decedent’s arbitration agreement. Consistent with
Mummert, we are persuaded by the reasoning from states that
18
de-emphasize the derivative nature of a wrongful death claim
and instead emphasize its independent status.
Futurecare, 143 A.3d at 212.
As a matter of law, logic, and public policy, this Court should align itself with those
jurisdictions that have refused to compel arbitration in wrongful death cases. Our wrongful
18
See Mummert v. Alizadeh, 77 A.3d 1049 (Md. 2013).
24
death statute is not derivative of the decedent’s claims; to the contrary, it is by its express
terms a new cause of action for the benefit of the decedent’s heirs and beneficiaries, not
for the benefit of the decedent’s estate. Nothing in our medical malpractice laws indicates
a legislative preference for arbitration, even assuming (as I do not) that such a preference
could override the wrongful death beneficiaries’ constitutional rights. See W. Va. Const.
art. III, §§ 10 & 17. Nothing in our contract law precedents supports a finding that wrongful
death beneficiaries can be considered third-party beneficiaries to a contract signed by the
decedent or on the decedent’s behalf. Nothing in our arbitration law precedents supports a
finding that there is a strong presumption in favor of arbitration; to the contrary, as noted
previously, this Court has specifically held that “[n]othing in the Federal Arbitration Act .
. . overrides normal rules of contract interpretation.” U-Haul, 232 W. Va. at 439, 752
S.E.2d at 593 (citation omitted).
I conclude with a brief discussion of one issue that is specific to this case: what
result obtains where the complaint alleges both survival claims (Counts I – IV) 19 and a
wrongful death claim (Count VI)? The survival claims are brought on behalf of the
decedent’s estate, and seek damages for the injuries suffered by Ms. Wagoner during her
lifetime. These claims are derivative under any reasoned analysis, and I reluctantly agree
with every court that has considered the issue that a valid arbitration clause 20 signed by the
decedent, or on his or her behalf, is binding as to derivative claims. Therefore, a circuit
court has several options. First, the court may proceed with the wrongful death action and
stay arbitration on the survival claims, with the understanding that the outcome of the
wrongful death claim has no preclusive effect, one way or the other, on the outcome of the
arbitration. This option will greatly increase the time and expense required to “put the case
to bed,” which is a detriment to all parties. Second, the court may allow the case to proceed
simultaneously on two different “tracks,” with the survival claims going to arbitration and
the wrongful death claim proceeding in court, again with the understanding that the
outcome in either forum has no preclusive effect on the other. This option will allow the
case to be finally resolved within a reasonable time frame, but will still result in greatly
increased expense. I suggest that a third option may be for the court to determine, on a
case by case basis, whether either of these “two-track” procedures may result in a denial of
the wrongful death beneficiaries’ constitutional right to “remedy by due process of law . .
. without sale, denial or delay.” W. Va. Const., art. III, § 17. If so, then arbitration of the
survival claims must yield, and the survival claims may be tried in court together with the
wrongful death claims.
19
Count V is a “John Doe” count designed to preserve the plaintiffs’ right to proceed
against defendants currently unknown.
20
As noted at the outset, for purposes of this dissent I am assuming that the
arbitration agreement signed by Ms. Oates was neither substantively nor procedurally
unconscionable.
25
As a result of the majority’s decision today, the wrongful death beneficiaries of
Donna M. Wagoner are being deprived of their claims for damages as set forth in our
wrongful death statutes, and deprived of their day in court to litigate those claims. I cannot
concur in this injustice. Further, I cannot stand by silently as West Virginia citizens’
statutory and constitutional rights are further eroded in what appears to be a concerted
effort by this Court to replace juries with arbitrators, even when this result is not mandated
by any decision of the United States Supreme Court or this Court. Accordingly, I dissent.
26