Council for Educ. Travel U.S., Inc. v. M.S.

1

Council for Educational Travel United States of America, Inc., Defendant Below, Petitioner v. M.S., Plaintiff Below, Respondent

No. 22-928

Supreme Court of Appeals of West Virginia

April 11, 2024

(Cabell County 22-C-171)

MEMORANDUM DECISION

Petitioner Council for Educational Travel United States of America, Inc. ("Petitioner"), appeals the Circuit Court of Cabell County's November 16, 2022, order denying Petitioner's motion to dismiss and compel arbitration.^[1] Respondent M.S.^[2]("Respondent") asserts multiple causes of action arising out of alleged injuries she suffered while she was participating in a high school foreign exchange program administered and operated by Petitioner. Prior to participating in the foreign exchange program, Respondent and her parents entered into a contract with Petitioner that included an arbitration provision. The circuit court ruled that the arbitration provision was unenforceable. Upon review, we agree with the circuit court's ruling and find that a memorandum decision affirming its order is appropriate. See W.Va. R App. P. 21.

In December of 2020, Respondent and her parents, who are Brazilian citizens, signed an agreement ("Program Agreement") with Petitioner, a California corporation that coordinates international student exchange programs. The Program Agreement provided the terms and conditions to which Respondent and her parents agreed relating to Respondent's participation in Petitioner's student exchange program. Respondent was sixteen when she signed the Program Agreement.^[3]

The Program Agreement included the following provisions:

M. Arbitration and Venue: This Agreement shall be deemed to have been made in the State of California, USA and its validity, construction, breach, performance, and interpretation shall be governed by the laws of the State of California, USA. The parties to the Agreement acknowledge and agree that any dispute or claim arising out of this Agreement, any resulting or related transaction, or the relationship of the parties, shall be decided by neutral exclusive and binding arbitration in the County of Orange, State of California, USA.... In the event that the arbitration clause is deemed void or inapplicable, each party expressly consents to and submits to the personal jurisdiction of the federal or state court(s) of Orange County, California, USA[.]

N. Authority of Parent/Guardian: Each parent/guardian who signs this Agreement represents and warrants that he or she, together with the other parent/guardian who signs this Agreement, if any, is the custodial parent/guardian of the Student and has full authority to sign this Agreement on behalf of the Student as his/her legal guardian without the consent or approval of any other person[.]

O. Ratification of Agreement: In the event the Student is under the age of 18 at the time of execution of this Agreement, and the Student attains 18 years of age while participating in the Program, [the] Student agrees that continued participation in the [P]rogram after he/she attains 18 is deemed a ratification and adoption of all the terms and conditions of this Agreement.^[4]

In August of 2021, Petitioner placed Respondent with a host family in Huntington, West Virginia. The host family included Darrel Wells ("Mr. Wells"). Mr. Wells allegedly installed hidden cameras in Respondent's bedroom and bathroom, surreptitiously recording her.^[5] Respondent discovered the recordings in April of 2022. She immediately left the Wells' residence and contacted the police. She also contacted Petitioner and states that she spoke "with one of [Petitioner's] directors." According to Respondent's complaint, the director chastised Respondent for contacting the police and tried to coerce her into signing a "Program Release" form by "falsely and fraudulently claiming that failing to sign the Program Release would jeopardize her visa status and she would be unable to return to the United States."

On May 12, 2022, Respondent's father^[6] filed this lawsuit on Respondent's behalf against Petitioner and Mr. Wells, asserting causes of action for negligence, intentional infliction of emotional distress, and violation of the West Virginia Wiretapping and Electronic Surveillance Act, West Virginia Code §§ 62-1D-1 to -16. On August 4, 2022, Petitioner filed a "Motion to Dismiss and Compel Arbitration, or in the Alternative, to Dismiss." Petitioner asserted, among other arguments, that the Program Agreement contains (1) a valid arbitration agreement that should be enforced; and (2) a valid choice of law provision directing that "the laws of California shall govern" the Program Agreement's validity, construction, and interpretation.

The circuit court entered an order on September 16, 2022, substituting Respondent as the named plaintiff in this case, replacing her father, after Respondent advised the court that she had reached the age of majority.^[7] On September 22, 2022, Respondent's counsel sent a letter notifying Petitioner that Respondent, who had now attained the age of majority, was disaffirming the Program Agreement, including its arbitration provision.

On September 27, 2022, Respondent filed her response to Petitioner's motion to dismiss and compel arbitration. Respondent noted that she had disaffirmed the Program Agreement and stated that "under either West Virginia or California law, [Respondent] cannot be compelled to arbitrate the claims stated in the Complaint filed in this action."^[8]

After holding a hearing, the circuit court denied Petitioner's motion to dismiss and compel arbitration. The circuit court determined that Respondent, upon reaching the age of majority, disaffirmed the Program Agreement, including the arbitration provision. The circuit court applied West Virginia's disaffirmance law^[9] and relied on a recent case from this Court in which we recognized that

West Virginia law clearly provides that "[c]ontracts by minors are generally not void, but voidable only, and may be ratified or disaffirmed after majority." Syl. Pt. 1, Hobbs v. Hinton Foundry Mach. & Plumbing Co., 74 W.Va. 443, 82 S.E. 267 (1914). See also Syl. Pt. 2, Andrews v. Floyd, 114 W.Va. 96, 170 S.E. 897 (1933) ("Contracts of infants, generally, are not void, but voidable at infant's election, and may be ratified or disaffirmed after majority.").

Fitness, Fun, &Freedom, Inc. v. Perdue, No. 20-0344, 2021 WL 653240 at *3 (W.Va. Feb. 19, 2021) (memorandum decision).

Based on its conclusion that Respondent disaffirmed the Program Agreement, the circuit court determined that Respondent "cannot be compelled to arbitrate the claims stated in the Complaint filed in this action."^[10] Following entry of the circuit court's November 16, 2022, order, Petitioner filed this appeal.

This Court has addressed our standard of review when considering a circuit court's ruling denying a motion to compel arbitration: "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); see also W.Va. Code § 55-10-30. Additionally, "[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." Syl. Pt. 2, Citizens Telecomm. Co. of W.Va. v. Sheridan, 239 W.Va. 67, 799 S.E.2d 144 (2017) (quoting Syl. Pt. 1, W.Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W.Va. 465, 796 S.E.2d 574 (2017)).

On appeal, Petitioner challenges the circuit court's ruling denying its motion to dismiss and compel arbitration. This Court has addressed a circuit court's role when faced with a motion to compel arbitration:

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).

This case turns on the first inquiry: whether a valid arbitration agreement exists between the parties. While Petitioner assigns error to each ground upon which the circuit court ruled in Respondent's favor, we find that the dispositive issue is whether Respondent was entitled to disaffirm the Program Agreement upon reaching the age of majority.^[11] In answering this question, we first explain our conclusion that California law applies to this issue based on the choice of law provision in the Program Agreement. We then address our finding that under California law, Respondent was entitled to disaffirm the Program Agreement, including its arbitration provision.

The Program Agreement contains a choice of law provision providing that it "shall be deemed to have been made in the State of California, USA and its validity, construction breach, performance, and interpretation shall be governed by the laws of the State of California[.]" This Court has recognized "the presumptive validity of a choice of law provision, (1) unless the provision bears no substantial relationship to the chosen jurisdiction or (2) the application of the laws of the chosen jurisdiction would offend the public policy of this State." Manville Pers. Inj. Settlement Tr. v. Blankenship, 231 W.Va. 637, 644, 749 S.E.2d 329, 336 (2013) (internal citations omitted).^[12]

Regarding the substantial relationship prong of this test, Petitioner is incorporated in California and the Program Agreement provides that "it shall be deemed to have been made" in California. W...