The 4th Circuit held that an adhesion contract requiring employees to arbitrate statutory claims was not made unenforceable under West Virginia law simply because employees had given up their right to a jury trial in state court. To prove unconscionability making the clause unenforceable requires proof that the arbitration clause limited the employees' rights to recover under state law.
Larry Wood filed suit alleging sexual discrimination and wage law claims in violation of West Virginia law after he was fired by American General Life. American General responded by filing motion in federal court in West Virginia seeking to compel arbitration, based on an agreement presented to employees in 1998. The district court granted the motion and Wood appealed to the 4th Circuit.
On review, the appeals court first noted that West Virginia courts use a case-by-case analysis to review adhesion contracts for unconscionability, separating acceptable adhesion contracts from unfair ones. The courts look at whether there is a significant imbalance in bargaining power and terms favoring the stronger party. …