PER CURIAM:
The instant case is before the Court upon the appeal of George Grayiel, Jr., Petitioner, from a February 1, 2011, order of the Circuit Court of Putnam County, West Virginia, granting the Respondents'
In January 2000, Martin Twist and Drew Thomas solicited Mr. Grayiel to invest in certain companies owned by Twist for the purpose of drilling for natural gas in and around Kanawha County, West Virginia. Petitioner entered into the first of twenty subscription and/or partnership agreements
Each one of these agreements contained an arbitration clause that, inter alia, stated that both parties were bound to arbitrate their disputes. When Petitioner signed these agreements, he was not represented by counsel. At the beginning of the relationship, Petitioner received some profits from these investments. However, production allegedly diminished and the money flow ceased. The relationship between the parties soured and Petitioner filed suit against Respondents on November 17, 2008. The Complaint asserts violations of the West Virginia Securities Act alleging that respondents were selling unregistered securities, respondents were not permitted to sell securities in West Virginia, the terms were unfair, the funds were not used for the purposes for which they were solicited, and the purchases were induced by fraud and misrepresentation. The Complaint also asserts claims of lost opportunity, unjust enrichment, conversion, fraud and misrepresentation, negligence, intentional infliction of emotional distress, and a right of rescission. The Complaint seeks compensatory and punitive damages and attorney's fees.
On January 9, 2009, Respondents filed a motion to dismiss alleging that the circuit court did not have jurisdiction to resolve the dispute due to the arbitration clauses contained in the agreements. On February 13, 2009, Petitioner filed Plaintiff's Response in Opposition to Defendant's Motion to Dismiss arguing that there remained factual questions
Following discovery, Petitioner filed his Supplemental Response in Opposition to Defendant's Motion to Dismiss asserting that the Respondents failed to comply with the Court's order and thwarted Petitioner's discovery efforts by refusing to meaningfully answer most of Petitioner's questions in deposition. Petitioner also argued that the parties agreed that state, rather than federal, law would govern all disputes arising under the subscription agreements. Specifically, Petitioner argued that under a choice of law analysis, West Virginia law, rather than Kentucky or Indiana law, applied because West Virginia had the most significant connection to the parties and contracts.
On November 1, 2010, Respondents filed Defendants' Response to Plaintiff's Supplemental Response in Opposition to Defendant's Motion to Dismiss arguing that the threshold issue before the Court was whether the arbitration and forum selection clauses in the agreements were valid and enforceable, and that the Petitioner had not proven that the arbitration clause was unconscionable, thus the case should be dismissed for lack of jurisdiction. On February 1, 2011, the circuit court entered an order granting summary judgment to the Respondents finding that the arbitration provisions in the fifteen subscription agreements and five partnership agreements were not unconscionable. Following that order, Petitioner filed the instant appeal.
Herein, the circuit court granted summary judgment in favor of Respondents finding that because the court did not have jurisdiction to hear the case, it should be dismissed for arbitration.
Syl. Pt. 4, McGraw v. American Tobacco Company, 224 W.Va. 211, 681 S.E.2d 96 (2009). Likewise, "[a] circuit court's entry of summary judgment is reviewed de novo." Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). We have repeatedly held that under Rule 56(c) of the West Virginia Rules of Civil Procedure, "`"[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law." Syllabus Point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).' Syllabus Point 1,
With respect to the sufficiency of a circuit court's summary judgment order, this Court held in syllabus point three of Fayette County National Bank v. Lilly, 199 W.Va. 349, 484 S.E.2d 232 (1997) that:
As further explained below, we find that the summary judgment order in this case falls short of the standard articulated in Lilly.
The Petitioner presents the following four assignments of error: 1) the circuit court erred in requiring Petitioner to prove that the arbitration clauses in the parties' agreements are independently enforceable, rather than applying West Virginia law and finding those agreements (and their arbitration clauses) unenforceable en toto; 2) the circuit court erred in failing to find the agreements' arbitration clauses are independently unenforceable, either because they are unconscionable or because they were fraudulently procured; 3) the circuit court erred in refusing to find Respondent Martin Twist's deposition testimony an unresponsive and evasive effort to deprive Petitioner of any opportunity to conduct meaningful discovery; and 4) the circuit court erred in failing to enforce Respondent Twist's offer to repay the Petitioner. To the extent that we resolve this appeal on the first two assignments of error, we need not address the latter two issues.
Petitioner argues that the arbitration clauses in the contracts that Petitioner signed indicate a choice of state law, not federal law. Petitioner asserts that although the arbitration clauses variously specified Kentucky and Indiana law, this case has no connection to Indiana whatsoever and only a tenuous, remote connection to Kentucky. Thus, Petitioner contends that West Virginia's forum rules on choice of law require application of West Virginia state law, not Kentucky or Indiana law, to the analysis of arbitrability of Petitioner's claims. Petitioner alleges that by requiring him to prove that the arbitration clauses were independently unenforceable, a requirement that West Virginia law allegedly does not impose, the circuit court implicitly applied the FAA.
Conversely, Respondents argue that the amendment which specifies that the FAA, not state law, shall govern arbitrability is not a fabrication. Respondents assert that although they were unable to locate full and complete copies of each of the twenty agreements executed by Petitioner and Respondent Twist at the outset of litigation, Petitioner had full and complete copies of all twenty agreements and shared a copy of the same with Respondents' counsel during Twist's deposition. Respondents assert that Petitioner testified that he was aware of the amendment and its terms, the sole purpose of which was to allegedly modify the arbitration agreements to the degree required under West Virginia law after this Court's decision in State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d 265 (2002), which prohibited arbitration agreements from disallowing punitive damages. Respondents allege that Petitioner never made any allegation of the amendment's impropriety before the circuit court and thus, this issue was not addressed below. Additionally, Respondents argue that Petitioner's lengthy assertions regarding the fact that state law instead of federal law applies are of no moment because the FAA specifically prohibits any state policy that would "single out" an arbitration clause for invalidation. Respondents assert that any set of state arbitrability rules that are in conflict with the terms of the FAA are trumped by federal law. Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987); Southland v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). Respondents also contend that West Virginia law strictly limits the power of state courts in making determinations regarding arbitration clauses, holding that "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 v. Kaufman, 225 W.Va. 250, 692 S.E.2d 293 (2010).
Petitioner replies that no one is sure from where the purported amended arbitration clause came, as Respondents proffered this amendment into the record and it pertained
When we review the appendix and supplemental appendix submitted by the parties and the record of the circuit court below, it is readily apparent that this threshold question of "what law applies" (federal law, Indiana law, Kentucky law, or West Virginia law) was never addressed by the circuit court. Although Petitioner raised the issue in its Response to Respondents' motion to dismiss that state law, not federal law, applied to the issue of arbitrability pursuant to the terms of the subscription and partnership agreements, the circuit court engaged in no analysis of this issue. Rather, the circuit court wholly skipped this threshold issue and simply analyzed the enforceability of the arbitration provision itself under West Virginia law regarding unconscionability.
Next, Petitioner argues that the arbitration provisions that he agreed to are unenforceable because they are unconscionable
Second, Petitioner argues that the arbitration clauses are substantively unconscionable for multiple reasons. Petitioner contends that several of the contracts require arbitration to be conducted in the remote jurisdiction of Indiana. Petitioner asserts that Twist picked Indiana because he knew it would be inconvenient for his victims to seek restitution. Petitioner contends that a specific arbitral forum must allow for the effective vindication of a claim, otherwise, the arbitration clause would conflict with one of the purposes of arbitration, i.e., providing a suitable alternative forum for plaintiff's claims.
Petitioner also asserts that the arbitration clauses deny petitioner the opportunity to seek several important claims and remedies, including punitive damages and statutory damages under securities acts designed to prevent the fraudulent and predatory sale of securities. See Mortg. Elec. Registration Sys., Inc. v. Abner, 260 S.W.3d 351 (Ky.Ct. App.2008) (invalidating an arbitration clause that forced plaintiffs to forego substantial statutory and other rights). Petitioner contends that the circuit court erroneously found that all remedies available in court are available in arbitration — but that error is understandable, inasmuch as the court was relying on arbitration language that was apparently created for the court's benefit.
Likewise, Petitioner avers that the cost of arbitration will effectively keep petitioner from seeking any remedy. Petitioner argues that in arbitrations involving other of his victims, Twist has done everything possible to increase costs and prolong the process. Petitioner states that Twist has made him a poor man who cannot afford this. Lastly, Petitioner asserts that inadequate procedures will be available in arbitration, such as discovery. Petitioner will need civil discovery to learn the history and extent of Twist's fraudulent misrepresentations.
Petitioner contends that the arbitration clauses solely benefitted Twist. Petitioner had only one obligation, to give Twist money, an obligation that he performed when the contracts were signed. Petitioner argues that at no point could he possibly "breach" any obligation to Twist. However, Twist had statutory, contractual, fiduciary, and common-law duties to petitioner before and during performance of the agreements. Petitioner asserts that the only possible dispute that could ever arise between the parties would be by him against Twist.
Moreover, Petitioner claims that unconscionability is not the only reason an arbitration clause can be held unenforceable. "[I]f the claim is fraud in the inducement of the arbitration clause itself — an issue which goes to the `making' of the agreement to arbitrate — the federal court may proceed to adjudicate it." Prima Paint Corp. v. Flood & Conlkin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801, 1806, 18 L.Ed.2d 1270 (1967). Petitioner claims that Twist fraudulently induced petitioner into agreeing to arbitration. Petitioner avers that he asked Twist if Twist, Thomas, or Twist's other agents had any legal problems. Twist said they had not, which was very false and was undoubtedly calculated to lure in petitioner. Petitioner also avers that he asked Twist about the arbitration clauses and Twist explained that unsatisfied investors could still go to court.
In its brief order granting summary judgment, the court found insufficient evidence to conclude that one party had grossly inadequate bargaining power. The circuit court found that while the bargaining was unequal, it was not grossly so. The circuit court found that Petitioner did not "feel" as though he had inadequate bargaining power because he signed twenty contracts with Twist over a two year period. The circuit court found that although Petitioner was not represented by counsel, he had ample time to seek counsel's advice before signing, there is no allegation that he was pressured into signing, and he signed on his own free will. The circuit
It is important to note that at the time this appeal was filed and briefs were submitted, the circuit court and the parties did not have the benefit of this Court's most recent opinions in Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011) ("Brown I"); Brown v. Genesis Healthcare Corp., 229 W.Va. 382, 729 S.E.2d 217 (2012) ("Brown II"); Richmond American Homes v. Sanders, 228 W.Va. 125, 717 S.E.2d 909 (2011); and Dan Ryan Builders v. Nelson, ___ W.Va. ___, ___ S.E.2d ___ (2012). In syllabus point 4 of State ex rel. Richmond Homes, this Court held that:
228 W.Va. 125, 717 S.E.2d 909.
In Syllabus Point 16 of Brown I, we also stated:
228 W.Va. 646, 724 S.E.2d 250. "Under West Virginia law, we analyze unconscionability in terms of two component parts: procedural unconscionability and substantive unconscionability." Brown I, 228 W.Va. 646, 724 S.E.2d at 285. "Procedural and substantive unconscionability often occur together, and the line between the two concepts is often blurred. For instance, overwhelming bargaining strength against an inexperienced party (procedural unconscionability) may result in an adhesive form contract with terms that are commercially unreasonable (substantive unconscionability)." Id.
In Syl. Pt. 20 of Brown I, we explained that:
228 W.Va. 646, 724 S.E.2d 250. We set forth the following guidelines for determining procedural
Id. "Procedural unconscionability often begins with a contract of adhesion." Richmond Homes, 228 W.Va. at 125, 717 S.E.2d at 921. In Syl. Pt. 18 of Brown I, we stated that:
228 W.Va. 646, 724 S.E.2d 250. As we recognized in State ex rel. Dunlap v. Berger, "[f]inding that there is an adhesion contract is the beginning point for analysis, not the end of it; what courts aim at doing is distinguishing good adhesion contracts which should be enforced from bad adhesion contracts which should not." State ex rel. Dunlap v. Berger, 211 W.Va. 549, 557, 567 S.E.2d 265, 273 (2002) (quoting American Food Management, Inc. v. Henson, 105 Ill.App.3d 141, 61 Ill.Dec. 122, 434 N.E.2d 59, 62-63 (1982)), cert. denied, 537 U.S. 1087, 123 S.Ct. 695, 154 L.Ed.2d 631 (2002).
We offered guidelines for analyzing substantive unconscionability in Syllabus Point 19 of Brown I:
228 W.Va. 646, 724 S.E.2d 250. If an agreement to arbitrate imposes high costs that might deter a litigant from pursuing a claim, a trial court may consider those costs in assessing whether the agreement is substantively unconscionable. As the United States Supreme Court recognized, "[t]he existence of large arbitration costs could preclude a litigant ... from effectively vindicating her... rights in the arbitral forum." Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). "[I]t is not only the costs imposed on the claimant but the risk that the claimant may have to bear substantial costs that deters the exercise of the constitutional right of due process." Id. In Syllabus Point 4 of State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d 265, we held that in an unconscionability analysis, a trial court could consider high costs that an arbitration agreement imposes and whether it might deter a litigant from pursuing a claim:
Because the circuit court, if it makes a choice of law determination that West Virginia law should govern the issue of enforceability, did not have the benefit of the guidance provided in these opinions in assessing whether the arbitration clauses at issue are unconscionable, we remand the issue of unconscionability to the circuit court for consideration of the factors noted above.
For the foregoing reasons, we reverse the circuit court's February 1, 2011, order granting summary judgment to Respondents and remand for further proceedings consistent with this Opinion.
Syl. Pt. 1, in part, Poling v. Belington Bank, Inc., 207 W.Va. 145, 529 S.E.2d 856 (1999) (Emphasis added). Therefore, we will consider the issues presented in this appeal under a summary judgment standard of review.
Subsequently, in Syllabus Point 4 of State ex rel. Richmond American Homes v. Sanders, 228 W.Va. 125, 717 S.E.2d 909 (2011), this Court held that:
