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Media Alerts - Goodwin v. Branch Banking & Trust Company - Fourth Circuit
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December 5, 2017
  Goodwin v. Branch Banking & Trust Company - Fourth Circuit
The Good, The Bad, & The Unconscionable: Fourth Circuit Affirms Refusal to Enforce Unconscionable Arbitration Clause

Areas of Law: Arbitration

Issue Presented: Whether an arbitration agreement with substantively and procedurally unconscionable, and thus unenforceable.

Brief Summary: Latricia Goodwin sued Branch Banking & Trust ("BB&T"). BB&T moved to compel arbitration pursuant to an arbitration agreement in the parties' Loan Agreement. The United States District Court for the Southern District of West Virginia found the parties had unequal bargaining power, Goodwin signed in a rush, and the arbitration provision was located two pages after Goodwin's signature line. Moreover, the terms of the agreement discouraged litigation and favored BB&T. Thus, the District Court found the provision to be procedurally and substantively unconscionable, and refused to enforce it. BB&T appealed. The United States Court of Appeals for the Fourth Circuit affirmed, finding no error in the lower court's ruling of unconscionability, or its decision not to sever the unconscionable terms from the arbitration provision.

Extended Summary: Latricia Goodwin filed a class action law suit against Branch Banking & Trust Company ("BB&T") alleging violations of the West Virginia Consumer Protection Act. BB&T removed the action to the United States District Court for the Southern District of West Virginia, and moved to compel arbitration pursuant to the parties' Loan Agreement. Although the standard for moving to compel arbitration was met, Goodwin argued that the arbitration clause was unenforceable because it was unconscionable.

The District Court explained that federal law favors enforcing arbitration agreements, and such agreements should be analyzed under contract law. In West Virginia, a contract is unenforceable if it is unconscionable. Consequently, the court analyzed the arbitration agreement for procedural and substantive unconscionability. To read the District Court's opinion in full, click here.

As evidence of procedural unconscionability, the District Court explained that Goodwin was an unsophisticated party contracting with a national lender. Goodwin signed in a rush, and the arbitration clause was two pages after her signature. The court found this was sufficient to render a substantively unreasonable agreement unconscionable. Looking to the agreement's substance, the District Court noted that Goodwin was subject to a one-year statute of limitations, while BB&T enjoyed a three-year statute of limitations. The agreement limited Goodwin to arbitration, while BB&T could seek relief in a variety of forums. The court also found that numerous provisions in the agreement - fee shifting, a demand for arbitrator experience in bank lending contracts, class action preclusion, and a shortened discovery period - all discouraged litigation. The court concluded that the arbitration provision's substantive terms and procedural inequities rendered it unconscionable, and thus denied BB&T's motion to compel arbitration. BB&T appealed.

On appeal, BB&T argued that the district court erred in refusing to (1) enforce the arbitration provision and (2) sever the unconscionable terms and enforce the rest of the arbitration provision. The Fourth Circuit reviewed the District Court's ruling de novo, and concluded the district court did not err in finding the arbitration provision unconscionable or refusing to sever unconscionable terms from the agreement. Thus, the Fourth Circuit affirmed the district court's ruling.

To read the Fourth Circuit opinion, click here.

Panel: Chief Judge Gregory, Judge Harris, and Senior Judge Hamilton

Argument Date: None

Date of Issued Opinion: 10/31/2017

Docket Number: No. 17-1412

Decided: Affirmed by unpublished per curiam opinion

Case Alert Author: Ashley Fellona, Univ. of Maryland Carey School of Law

Counsel: Jonathan L. Anderson, JACKSON KELLY PLLC, Charleston, West Virginia; Christopher K. Robertson, JACKSON KELLY PLLC, Martinsburg, West Virginia; John C. Lynch, Elizabeth S. Flowers, TROUTMAN SANDERS LLP, Virginia Beach, Virginia, for Appellant. Jed Nolan, HAMILTON, BURGESS, YOUNG & POLLARD, P.C., Fayetteville, West Virginia; Karla Gilbride, PUBLIC JUSTICE, P.C., Washington, D. C., for Appellee.

Author of Opinion: Per curiam

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 12/05/2017 12:27 PM     4th Circuit  

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