Salem International University v. Taylor Bates

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).
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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
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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:
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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
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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
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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.
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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.
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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:
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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
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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
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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)).
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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
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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
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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.
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