Ancil G. Ramey, Esq.
D. Hunter, Esq.
Hannah B. Curry, Esq. Neely & Hunter
Steptoe & Johnson, PLLC Charleston, West Virginia
Charleston, West Virginia Attorney for the Respondent,
Attorneys for the Petitioner Larry L. Dawson
The Opinion of the Court was delivered PER CURIAM.
JUSTICE MCGRAW dissents.
2. 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. Syllabus point 1, Berkeley
County Public Service District v. Vitro Corporation of America, 152 W. Va.
252, 162 S.E.2d 189 (1968).
3. 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. Syllabus point 6, State ex rel. Frazier & Oxley, L.C. v. Cummings, 212 W. Va. 275, 569 S.E.2d 796 (2002).
4. Where parties to
a contract agree to arbitrate either all disputes, or particular limited
disputes arising under the contract, and where the parties bargained for
the arbitration provision, such provision is binding, and specifically enforceable,
and all causes of action arising under the contract which by the contract
terms are made arbitrable are merged, in the absence of fraud, into the award
of the arbitrators. Syllabus point 1, Board of Education of the
County of Berkeley v. W. Harley Miller, Inc., 160 W. Va. 473, 236
S.E.2d 439 (1977).
The petitioner herein, City Holding Company [hereinafter referred to as City Holding], requests this Court to issue a writ of prohibition to prevent the respondent herein, the Honorable Tod J. Kaufman, Judge of the Circuit Court of Kanawha County [hereinafter referred to as Judge Kaufman], from enforcing his order denying City Holding's motion to dismiss and enjoining pending arbitration proceedings. Upon a review of the parties' arguments and the pertinent authorities, we deny the writ of prohibition.
The dispute in this case does not stem from Mr.
Dawson's termination from City Holding, but rather from Mr. Dawson's attempts to exercise previously-issued
stock options. Pursuant to Mr. Dawson's employment with City Holding, he
had been issued a series of stock options in 1997, 1998, and 1999. On October
20, 2000, the effective date of Mr. Dawson's resignation, City Holding stock
was trading well below Mr. Dawson's stock option prices. Mr. Dawson did not
exercise any stock options at that time because the option prices were greater
than the market price. Instead, he negotiated for the preservation of his
stock option rights by having a carve-out provision inserted into the Severance
Thereafter, Mr. Dawson devised a plan to surrender
his options and convert them into cash. Mr. Dawson wanted to surrender his
options without purchasing any stock from the company as set forth in the
option agreements of 1997, 1998, and 1999. Mr. Dawson's plan called for his
tender of certain stock options, without payment of the option price, and
conversion of his remaining shares to market price. His plan then called
for his surrender of the converted shares and his receipt of $107,955.25
from City Holding.
City Holding rejected Mr. Dawson's plan for the
surrender of his stock options. On January 8, 2003, Mr. Dawson filed suit
in the Circuit Court of Kanawha County alleging breach of contract, negligence
or gross negligence, violations of the West Virginia Uniform
Securities Act, fraud, and promissory estoppel in connection with the three
stock option awards.
In response to Mr. Dawson's commencement of a civil
suit, City Holding filed a Demand and Complaint for Arbitration with
the American Arbitration Association. The parties agreed, with Mr. Dawson
reserving his objections to arbitration, upon the Honorable A. Andrew MacQueen
as arbitrator. City Holding also filed a Motion to Dismiss or, in the
Alternative, to Stay Pending Arbitration, in the Circuit Court of Kanawha
County. A hearing was held on April 19, 2004, and Judge Kaufman denied the
motion to dismiss and enjoined the pending arbitration proceedings. City
Holding thereafter filed this prohibition action.
Mindful of these standards, we proceed to consider the parties' arguments.
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2 (1947). The 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. Pioneer Props., Inc. v. Martin, 557 F. Supp. 1354 (D. Kan. 1983), appeal dismissed, 776 F.2d 888 (10th Cir. 1985). Determination of the scope of an agreement falling within the ambit of the Federal Arbitration Act is governed by federal law. McPheeters v. McGinn, Smith & Co., Inc., 953 F.2d 771 (2d Cir. 1992). In 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. 9 U.S.C. § 1, et seq.; Metro Indus. Painting Corp. v. Terminal Constr. Co., 287 F.2d 382, 385 (2d Cir. 1961); Accord Hart v. Orion Ins. Co., 453 F.2d 1358 (10th Cir. 1971); Coudert v. Paine Webber Jackson & Curtis, 543 F. Supp. 122 (D. Conn. 1982), overruled on other grounds by Coudert v. Paine Webber Jackson & Curtis, 705 F.2d 78 (2d Cir. 1983); PAS-EBS v. Group Health, Inc., 442 F. Supp. 937 (S.D.N.Y. 1977); State ex rel. Wells v. Matish, ___ W. Va. ___, ___, 600 S.E.2d 583, 590 (2004) (per curiam).
The applicable law makes clear that the Federal Arbitration
Act applies to agreements to arbitrate and does not apply to any contract or
any provision of a contract that excludes arbitration. See AT & T
Techs., Inc., v. Communications Workers of America, 475 U.S. 643, 106 S. Ct.
1415, 89 L.Ed.2d 648 (1986) (holding that the arbitration clause does not cover
disputes specifically excluded by contract language); Choice Hotels Int'l,
Inc., v. BSR Tropicana Resort, Inc., 252 F.3d 707 (4th Cir. 2001)
(determining collection action exemption to arbitration agreement to be valid); Long-Airdox
Co. v. International Union United Auto. Aerospace & Agric. Implement Workers
of America (UAW), Local 772, 622 F.2d 70 (4th Cir. 1980) (recognizing validity
of exclusion from arbitration of no-strike clause of collective bargaining agreement). Parties
are only bound to arbitrate those issues that by clear language they have agreed
to arbitrate; arbitration agreements will not be extended by construction or
implication. Daimler Chrysler Corp. v. Franklin, 814 N.E.2d 281
(Ind. Ct. App. 2004) (citing Showboat Marina Casino P'ship v. Tonn & Blank
Constr., 790 N.E.2d 595 (Ind. Ct. App. 2003)).
This Court has held where parties have bargained for arbitration, the arbitration provision is binding and enforceable on all causes of action arising under the contract that, by the contract terms, are made arbitrable. See generally Board of Educ. of the County of Berkeley v. W. Harley Miller, Inc., 160 W. Va. 473, 236 S.E.2d 439 (1977). Our case law requires that a party must assent to arbitration before it can be forced into arbitration and denied access to the courts. State ex rel. United Asphalt Suppliers, Inc. v. Sanders, 204 W. Va. 23, 27-28, 511 S.E.2d 134, 138-39 (1998).
In view of the above, this Court must examine the contract in this case. This Court has previously held [t]he 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 County Pub. Serv. Dist. v. Vitro Corp. of America, 152 W. Va. 252, 162 S.E.2d 189 (1968). Furthermore,
[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).
Turning to the facts of the instant case, the Severance Agreement, at paragraph 4, provides that Mr. Dawson
voluntarily and knowingly releases and discharges (a) City Holding Company . . . from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which he may have, or claim to have, against them as a result of and/or relating to his employment and separation from employment and does hereby agree not to assert any such claim against any of them.
Further, at paragraph 9, the Severance Agreement provides that
[i]n the event either party files a claim against the other, which each agrees not to do, then such a claim or claims will be resolved in accordance with the then existing rules of the American Arbitration Association in Charleston, West Virginia, as the exclusive remedy for such dispute and instead of any court or administrative action, which is expressly waived. The parties fully understand that it is comprehensive and covers any and all disputes between the parties including, but not limited to, any claims based on alleged violations of this Severance Agreement and General Release, Dawson's employment or separation therefrom.
Mr. Dawson negotiated separately for the preservation of his stock option rights in the Severance Agreement which sets forth his rights as follows at paragraph 8:
[t]he parties understand and agree that no provisions of this Severance Agreement and Release of All Claims shall affect the rights of either party under City Holding Company's 1993 Stock Incentive Plan and/or any and all stock options previously awarded by the Company to Dawson.
City Holding argues that this Court should apply its recent decision in State ex rel. Wells v. Matish, ___ W. Va. ___, 600 S.E.2d 583 (2004) (per curiam), to find the present arbitration clause valid and enforceable. Wells discussed and reiterated the validity and enforceability, in general, of arbitration agreements. See generally Wells, id. While Wells represents this Court's holdings on arbitration agreements, it does not automatically validate all arbitration agreements. See id. (finding that an arbitration provision can be invalid in situations of unconscionable contract provisions or contracts of adhesion). City Holding contends that the application of Wells validates the present arbitration agreement and mandates the arbitration of the current stock option dispute. City Holding's argument is unpersuasive in light of the carve-out provision contained in the present agreement.
In Wells, the arbitration provision stated
that any dispute that arises between the parties as a result
of the employment contract is subject to the sole and exclusive remedy
of binding arbitration. Wells, ___ W. Va. at ___, 600 S.E.2d
at 590. The arbitration provision in the present case similarly provides
that any claim or claims will be resolved in accordance with the then
existing rules of the American Arbitration Association in Charleston, West
Virginia, as the exclusive remedy for such dispute. The difference
in the Wells case and the present case is the existence of a carve-out
provision. The Severance Agreement in the present case provides that no
provisions of this Severance Agreement and Release of All Claims shall affect
the rights of either party under City Holding Company's 1993 Stock Incentive
Plan and/or any and all stock options previously awarded by the Company to
Dawson. Such a carve-out provision is not present in the Wells case.
The carve-out provision clearly states that no provisions of
the Severance Agreement shall affect the rights of either party under
City Holding Company's 1993 Stock Incentive Plan and/or any and all stock
options previously awarded by the Company to Dawson. (Emphasis added).
The language is clear and unambiguous and effectively removes the stock options
from the scope of the arbitration clause of the Severance Agreement. To interpret the language of the contract any other way would
be inconsistent with the plain and unambiguous language of the carve-out