Dytko et al v. Chesapeake Appalachia, LLC

Filing 20

MEMORANDUM OPINION AND ORDER DENYING AS MOOT 5 DEFENDANT'S MOTION TO COMPEL AND DISMISS PLAINTIFFS' COMPLAINT, GRANTING IN PART AND DENYING IN PART 11 DEFENDANT'S MOTION TO COMPEL ARBITRATION AND DISMISS PLAINTIFFS' FIRST AMEN DED COMPLAINT AND STAYING CLAIMS OF HOLLY DYTKO, J.D. AND R.D. This civil action is DISMISSED insomuch as it concerns plaintiff Brian Dytko and is to be brought in arbitration in accordance with this memorandum opinion and order. The Clerk is DIREC TED to dismiss this civil action and strike it from the active docket of this Court insomuch as it concerns plaintiff Brian Dytko. As to the remaining claims in the amended complaint for private nuisance, negligence and intentional tort as they perta in to plaintiffs Holly Dytko, J.D. and R.D., this Court DENIES IN PART defendants motion to compel arbitration and dismiss plaintiffs first amended complaint. This Court, however, STAYS such claims pending the outcome of the arbitration. The remainin g plaintiffs are DIRECTED to notify this Court upon the conclusion of the arbitration proceedings. Brian Dytko (individually, and as the parent and next friend of J.D. and R.D.) terminated.; Case stayed. Signed by Senior Judge Frederick P. Stamp, Jr. on 5/30/2014. (copy to counsel of record via CM/ECF) (nmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
BRIAN DYTKO and HOLLY DYTKO,
individually and as the
parents and next friends of
J.D. and R.D., minors,
Plaintiffs,
v.

Civil Action No. 5:13CV150
(STAMP)

CHESAPEAKE APPALACHIA, LLC,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING AS MOOT DEFENDANT’S MOTION TO COMPEL
AND DISMISS PLAINTIFFS’ COMPLAINT,
GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION TO COMPEL ARBITRATION AND
DISMISS PLAINTIFFS’ FIRST AMENDED COMPLAINT AND
STAYING CLAIMS OF HOLLY DYTKO, J.D. AND R.D.
I.

Background

Plaintiff, Brian Dytko, entered into an oil and gas lease
dated November 7, 2008, (“the lease”) with defendant, Chesapeake
Appalachia, LLC.

The lease covers a 41-acre tract of land located

in Ohio County, West Virginia.

The plaintiffs filed this civil

action in the Circuit Court of Ohio County, West Virginia, based on
the negotiation and execution of such lease and based on the
defendant’s operations on the land subject to the lease.

In their

complaint, the plaintiffs alleged that Brian Dytko was fraudulently
induced to enter into the lease and as such, the lease should be
declared void.

The plaintiffs, however, also alleged that the

lease should be declared void because the defendant breached the

agreement by incorrectly paying royalty payments to Brian Dytko.
Further, the plaintiffs collectively asserted claims for private
nuisance, negligence, and intentional tort based on the defendant’s
operations on the land subject to the lease.
The defendant removed this civil action to this Court on the
basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).
At that time, the defendant filed a motion to compel arbitration
and dismiss the complaint.

The plaintiffs responded to this

motion,

amended

but

additional

also

count

filed

an

entitled

Arbitrate Exists.”

“No

Valid

complaint,

asserting

an

Enforceable

Agreement

to

Accordingly, due to the plaintiffs amending

their complaint, this Court dismisses as moot defendant’s motion to
compel arbitration and dismiss.
In response to the plaintiffs filing their amended complaint,
the defendant filed a motion to compel arbitration and dismiss the
amended complaint.

In this motion, the defendant argues: (1) the

Federal Arbitration Act (“FAA”) supports compelling arbitration in
this instance; (2) a valid arbitration agreement exists between the
parties, as it is not ambiguous or unconscionable; and (3) the nonsignatory

plaintiffs

are

equitably

estopped

from

avoiding

arbitration.
The

plaintiffs

filed

a

response

in

opposition

to

the

defendant’s motion arguing that: (1) the FAA policy favoring the
application of arbitration agreements only applies when a valid and

2

enforceable arbitration agreement exists; (2) West Virginia law
demonstrates that a valid arbitration agreement does not exist due
to

the

agreement’s

ambiguity

and

unconscionability;

and

(3)

plaintiffs Holly Dytko and the minor children, J.D. and R.D.,
cannot be bound by the agreement because they are not signatories
to the agreement.
The

defendant

arguments

and

filed

reiterating

a

reply

those

addressing

made

in

its

the

plaintiffs’

initial

filing.

Accordingly, the defendant’s motion to compel arbitration and
dismiss the amended complaint is fully briefed and ripe for review.
For the reasons stated below, this Court grants the defendant’s
motion insomuch as it seeks to arbitrate and dismiss those claims
of plaintiff Brian Dytko.

As to the remaining claims for private

nuisance, negligence and intentional tort as they pertain to
plaintiffs

Holly

defendant’s motion.

Dytko,

J.D.

and

R.D.,

this

Court

denies

This Court finds, however, that such claims

should be stayed pending the outcome of the arbitration of Brian
Dytko’s claims.
II.

Applicable Law

The Federal Arbitration Act (“FAA”) applies to “[a] written
provision in any . . . 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 . . . .”

3

9 U.S.C. § 2.

When a party

seeks enforcement of the arbitration clause of an agreement during
proceedings in a district court, a party sufficiently “invoke[s]
the full spectrum of remedies under the [Federal Arbitration Act,
9 U.S.C. § 1, et seq. (“FAA”)].”

Choice Hotels Intern., Inc. v.

BSR Tropicana Resort, Inc., 252 F.3d 707, 710 (4th Cir. 2001).
In order to compel arbitration under the FAA, the law of the
United States Court of Appeals for the Fourth Circuit provides that
a moving party must “demonstrate (1) the existence of a dispute
between the parties, (2) a written agreement that includes an
arbitration provision which purports to cover the dispute, (3) the
relationship

of

the

transaction,

which

is

evidenced

by

the

agreement, to interstate or foreign commerce, and (4) failure,
neglect, or refusal of the [opposing party] to arbitrate the
dispute.”

Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th

Cir. 2002) (citing Whiteside v. Teltech Corp., 940 F.2d 99, 102
(4th Cir. 1991)).

Further, while federal law determines the

arbitrability of issues, “[w]hether a party agreed to arbitrate a
particular dispute is a question of state law governing contract
formation.”

Id. at 501 (citing First Options of Chicago, Inc. v.

Kaplan, 514 U.S. 938, 944 (1995)).
Federal policy generally takes a liberal stance in favor of
enforcement of contractual arbitration clauses.
F.3d at 500.
pursuant

to

See Adkins, 303

When determining whether an issue is arbitrable
a

contractual

provision,

4

courts

are

required

to

“resolve ‘any doubts concerning the scope of arbitrable issues
. . . in favor of arbitration.’”

Hill v. PeopleSoft USA, Inc., 412

F.3d 540, 543 (4th Cir. 2005) (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
III.
A.

Discussion

Validity of the Arbitration Clause
Defendant’s motion to compel arbitration is based upon the

following arbitration clause contained in the lease:
ARBITRATION: In the event of a disagreement between
Lessor and Lessee concerning this Lease, performance
thereunder, or damages caused by Lessee’s operations, the
resolution of all such disputes shall be determined by
arbitration in accordance with the rules of the American
Arbitration Association. All fees and costs associated
with the arbitration shall be borne equally be Lessor and
Lessee.
ECF No. 11 Ex. 1 *3.
The plaintiffs contest the second factor concerning whether
this Court must compel arbitration under the FAA based on this
clause.

The plaintiffs assert that a valid written agreement

between the parties to arbitrate does not exist, as any such
agreement is invalid due to its ambiguity and unconscionability.1
As

stated

above,

“[w]hether

a

1

party

agreed

to

arbitrate

a

This Court notes that the plaintiffs do not contest any of
the remaining factors that this Court is required to find to compel
arbitration, including the portion of the second factor concerning
whether the arbitration clause covers the plaintiffs’ claims.
Accordingly, this Court finds it unnecessary to discuss such
factors at length, other than to state for the record that the
defendant has established such factors.
5

particular dispute is a question of state law governing contract
formation.”

Adkins, 303 F.3d at 501.

The defendant, however,

asserts that based on West Virginia law, a valid agreement does
exist.

The defendant argues that the agreement is not ambiguous,

it is not procedurally unconscionable, and it is not substantively
unconscionable.

Therefore, the defendant requests that this Court

compel arbitration of the plaintiffs’ claims.
1.

Ambiguity

Under West Virginia law, contract language is considered
ambiguous “when it is reasonably susceptible to more than one
meaning

in

light

of

the

surrounding

circumstances

applying the established rules of construction.”

and

after

Williams v.

Precision Coil, Inc., 458 S.E.2d 327, 342 n.23 (W. Va. 1995).
Courts “should read [contract] provisions to avoid ambiguities and
not torture the language to create them.”
S.E.2d 161, 166 (W. Va. 1995).

Payne v. Weston, 466

As such, ambiguity does not result

merely because the parties do not agree to the construction of the
contract.

Lee v. Lee, 721 S.E.2d 53, 56 (W. Va. 2011).

Instead,

the question as to whether a contract is ambiguous is a question of
law to be determined by the courts.

Pilling v. Nationwide Mut.

Fire Ins. Co., 500 S.E.2d 870, 872 (W. Va. 1997).
The plaintiffs argue that the ambiguity of the arbitration
clause arises as a result of the language found in the severability
clause and the limitation of forfeiture clause.

6

The plaintiffs

argue that these two clauses, which make references to a “court of
competent jurisdiction” and to a “civil action,” cause confusion
and ambiguity as to whether or not a lessor actually has the right
to proceed with a civil action in court, rather than through
arbitration.

This Court disagrees.

Initially, this Court notes that the arbitration clause itself
is clear and unambiguous.
plaintiffs.

The

clause

This fact is not contested by the
states

that

“[i]n

the

event

of

a

disagreement between Lessor and Lessee concerning this Lease,
performance thereunder, or damages caused by Lessee’s operations,
the

resolution

arbitration.”

of

all

This

such

disputes

directive

is

shall

clear

be

and

determined

leaves

no

by

doubt

concerning the setting of such disputes or the types of disputes
that must be arbitrated.
The language of the severability and limitation of forfeiture
clauses does not alter this Court’s finding that the lease is clear
and unambiguous concerning the parties duty to arbitrate.
as

to

the

severability

clause,

its

reference

to

a

First,

court

of

competent jurisdiction holding a provision of the lease “invalid,
void, or unenforceable” does not render the arbitration clause’s
directive concerning arbitration ambiguous.
arbitration

clause

makes

clear

that

the

As stated above, the
parties’

disputes

concerning the lease are subject to arbitration and, therefore,
must be brought in that forum.

The severability clause does not

7

provide any rights to either party concerning the forum in which
they may bring their disputes.

As such, the mere reference to a

court of competent jurisdiction does not render the arbitration
clause’s directive that disputes must be decided in arbitration
susceptible to any different meaning.

Therefore, this Court finds

that the arbitration clause is not ambiguous based on the language
of the severability clause.
This Court further finds that the language of the limitation
of forfeiture clause also does not render the arbitration clause
ambiguous.

The plaintiffs assert that because it refers to a

“civil action,” such phrase causes the arbitration clause to be
ambiguous.

The entirety of the phrase in the limitation of

forfeiture clause referencing a possible civil action states “civil
action or proceeding[.]”

Therefore, it clearly references the

possibility of a proceeding rather than a civil action and never
states that a civil action would be the correct forum.

The

arbitration clause itself makes it clear what the correct forum
would be for any possible action concerning forfeiture.

Thus,

after reading all of the clauses in conjunction with one another,
this Court finds that the arbitration clause is not rendered
ambiguous based on either the limitation of forfeiture provision or
the severability provision.

See Legg v. Johnson, Simmerman &

Broughton, L.C., 576 S.E.2d 532, 537 (W. Va. 2002) (“‘The meaning
of a word is to be considered in the context in which it is

8

employed.

The meaning of a word thus is to be ascertained from a

reading of the entire contract, rather than from a consideration of
that one word alone . . . .”) (quoting 17A C.J.S. Contracts § 318
(1999)).
The plaintiffs argue that this case is similar to that of
State ex rel. Richmond American Homes of West Virginia v. Sanders,
717 S.E.2d 909 (W. Va. 2011), and based on the court’s finding in
that case, the arbitration clause at issue should be deemed
ambiguous and unenforceable. In Richmond American, the arbitration
section in that action also contained a mediation clause.

The

mediation clause stated that the parties were required to mediate
their claims prior to instituting a civil action and repeatedly
referred to the parties’ right to bring a civil action.

In the

same section of the contract, however, the arbitration clause
stated that the plaintiffs were barred from bringing a civil
action.

The court found that this continued reference to a right

to bring a civil action rendered the arbitration clause that
followed

ambiguous.

In

this

action,

the

severability

and

forfeiture clause is separate and distinct from the arbitration
provision. Further, neither clause at issue directs the plaintiffs
that they have a right to file a civil action.

Accordingly, this

Court finds that the contract at issue in Richmond American is
distinguishable from the lease involved in this action, and, thus,
the finding in Richmond American is not applicable to this action.

9

2.

Unconscionability

The plaintiffs next assert that this Court should invalidate
the arbitration clause because it is unconscionable.
Virginia

law,

finding

unconscionability

a

contract

requires

findings

unenforceable
of

some

Under West
based

level

of

upon
both

procedural and substantive unconscionability and is based upon a
finding

of

a

high

degree

of

“inequities,

improprieties,

or

unfairness” in both the procedure of the creation of the contract,
and in the contents of the contract itself.

Brown v. Genesis

Healthcare Corp., 729 S.E.2d 217, 226-27 (W. Va. 2012) (hereinafter
“Brown II”).

“[T]he particular facts involved in each case are of

utmost importance since certain conduct, contracts or contractual
provisions may be unconscionable in some situations but not in
others.”

Syl. pt. 2, Orlando v. Finance One of West Virginia,

Inc., 369 S.E.2d 882 (W. Va. 1988). “Substantive unconscionability
involves unfairness in the contract itself and whether a contract
term is one-sided and will have an overly harsh effect on the
disadvantaged party.”
a.

Syl. pt. 19, Brown I.

Procedural Unconscionability

As to procedural unconscionability, the West Virginia Supreme
Court of Appeals stated that,
Procedural
unconscionability
is
concerned
with
inequities,
improprieties,
or
unfairness
in
the
bargaining process and formation of the contract.
Procedural unconscionability involves a variety of
inadequacies that results in the lack of a real and
voluntary meeting of the minds of the parties,
10

considering all the circumstances surrounding the
transaction.
These inadequacies include, but are not
limited to, the age, literacy, or lack of sophistication
of a party; hidden or unduly complex contract terms; the
adhesive nature of the contract; and the manner and
setting in which the contract was formed, including
whether each party had a reasonable opportunity to
understand the terms of the contract.
Syl. pt. 17, Brown v. Genesis Healthcare Corp., 724 S.E.2d 250 (W.
Va. 2011) (hereinafter “Brown I”)).
In support of their claim of procedural unconscionability, the
plaintiffs assert that the contract at issue is a contract of
adhesion.

They state that the defendant is a sophisticated

corporate entity with an “army of lawyers” and has superior
bargaining power; whereas, Brian Dytko is inexperienced in the area
of oil and gas leases.

Further, they state that Brian Dytko did

not know what arbitration meant and it was not explained to him.
The plaintiffs also assert that the landman negotiating the lease
with Brian Dytko made misrepresentations concerning the defendant’s
operations by indicating that the defendant would not be operating
in the area within the five-year term contemplated by the lease.
This Court finds that such assertions in this instance fail to
establish procedural unconscionability.

Initially, this Court

finds that the lease is not a contract of adhesion.

“A contract of

adhesion is one drafted and imposed by a party of superior strength
that leaves the subscribing party little or no opportunity to alter
the substantive terms, and only the opportunity to adhere to the
contract or reject it.”

Syl. pt. 18, Brown I, 724 S.E.2d 250.
11

In

this case, the lease clearly demonstrates that bargaining between
the parties did occur.

While the lease seems to be a standard

lease used by the defendant in its operations, one of the terms of
this standard lease was removed from the lease between Brian Dytko
and the defendant. The clause removed was the clause providing the
defendant with the option to renew the lease.

In Brian Dytko’s

affidavit provided by the plaintiffs with their opposition to the
defendant’s motion to compel, Brian Dytko states that he wanted to
have the choice to extend the lease at the end of the five years
because the defendant’s landman negotiating the lease indicated
that the defendant may be doing work in the area at that time.
Accordingly, it is clear that negotiations took place concerning
the lease, and it was not offered on a take it or leave it basis.
Even if the lease could be said to be a contract of adhesion,
however, it would not render the lease unconscionable on that basis
alone.
2009).

State ex re. Clites v. Clawges, 685 S.E.2d 693, 700 (W. Va.
The

remaining

factors

concerning

unconscionability would still need to be examined.

procedural
In this

instance, those factors do not weigh in favor of finding procedural
unconscionability.

First, while the defendant may be said to be

the more sophisticated party to the oil and gas lease, Brian Dytko
through his request to remove the option to extend clause evidenced
his understanding of the lease terms.

Further, while the parties

need to be provided a reasonable opportunity to understand the

12

terms of the contract, there is no requirement that one party must
explain the terms of the contract to the other.

Adkins v. Labor

Ready, Inc., 185 F. Supp. 2d 628, 638 (S.D. W. Va. 2001), aff’d at
303 F.3d 496 (4th Cir. 2002) (“There is no requirement that the
more sophisticated party to a contract offer the less sophisticated
party an oral explanation of the terms of the contract.”).

Thus,

while the plaintiffs imply that the defendant should have explained
what arbitration was, the defendant was not under any obligation to
do so.
The plaintiffs’ argument that misrepresentations made to Brian
Dytko rendered the contract procedurally unconscionable is also
without merit.

Assuming that the landman did in fact make such

representations,
misrepresentations

a

determination

rendered

the

as

contract

to

whether

invalid

such

based

fraudulent inducement pertains to the entirety of the lease.

on
A

claim that the lease as a whole is invalid, rather than the
arbitration clause alone, is a question for the arbitrator and not
for this Court to decide. Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440, 446 (2006) (“[A] challenge to the validity of the
contract as a whole, and not specifically to the arbitration
clause, must go to the arbitrator.”).

Accordingly, this Court

finds that, based on the plaintiffs’ arguments, the arbitration
clause itself is not procedurally unconscionable.

13

b.

Substantive Unconscionability

This Court recognizes that a finding that an arbitration
clause is unconscionable requires both a finding of procedural and
substantive unconscionability.
that

the

clause

is

not

Although this Court has determined

procedurally

unconscionable,

it

will

nonetheless, for purposes of thoroughness, examine whether or not
the arbitration clause is substantively unconscionable.

As to

substantive unconscionability, the West Virginia Supreme Court of
Appeals stated that,
Substantive unconscionability involves unfairness in the
contract itself and whether a contract term is one-sided
and will have an overly harsh effect on the disadvantaged
party.
The factors to be weighed in assessing
substantive unconscionability vary with the content of
the agreement.
Generally, courts should consider the
commercial reasonableness of the contract terms, the
purpose and effect of the terms, the allocation of the
risks between the parties, and public policy concerns.
Syl. pt. 19, Brown I, 724 S.E.2d at 262.
The plaintiffs first argue that the clause is substantively
unconscionable because it lacks neutrality and structural fairness.
The plaintiffs assert that it is structurally unfair because the
defendant chose the arbitrator, which is the American Association
of

Arbitration

(“AAA”).

Further,

they

assert

that

it

is

structurally unfair because the AAA is paid on a fee-per-case
basis, and therefore, they argue that it will always be beholden to
the industry insider who makes the referral, which is the defendant
in this case.

14

Initially, this Court notes that the Federal Arbitration Act
(“FAA”) provides in part that “[i]f in the agreement provision be
made

for

a

method

of

naming

or

appointing

an

arbitrator

or

arbitrators or an umpire, such method shall be followed[.]” 9
U.S.C. § 5.

Thus, it is clear that the FAA contemplates that

arbitration agreements will in fact provide for a method of
appointing an arbitrator.

The arbitration clause in this instance

does provide such a method stating that the arbitration shall be
conducted “in accordance with the rules of the American Arbitration
Association.”

ECF No. 11 Ex. 1 *3.

The rules of the AAA provide

a detailed explanation concerning the appointment of an arbitrator.
See ECF No. 12 *13-14.
After a review of these rules, this Court finds that the AAA
rules provide sufficient protections against the appointment of a
biased arbitrator.
the

names

of

The method allows for both parties to strike

unacceptable

arbitrators,

and

provides

for

an

opportunity to rank the order of those who are acceptable. It does
not

provide

arbitrator.

either

party

with

the

sole

right

to

choose

the

Instead, the parties and the AAA work in unison to

choose an arbitrator that is as agreeable to both parties as
possible. Further, the FAA provides additional protections against
decisions

made

by

biased

arbitrators

in

the

event

such

an

arbitrator is chosen, in that it allows for courts to overturn

15

arbitration

awards

“where

there

corruption in the arbitrators.”

was

evident

partiality

or

9 U.S.C. § 10(a)(2).

In support of the plaintiffs’ argument that the clauses are
not neutral and are structurally unfair, the plaintiffs cite two
cases from the West Virginia Supreme Court of Appeals.

First, the

plaintiffs cite State ex rel. Dunlap v. Berger, 567 S.E.2d 265 (W.
Va. 2002).

In footnote 12 of this opinion, the court stated that

“[w]e have held that an impermissible structural unfairness in a
tribunal, be it judicial or arbitral, would be presumed where the
decision-maker is designated by one of the parties to a dispute and
where the person making the decisions is compensated on a fee-percase basis.”

Dunlap, 567 S.E.2d at n.12.

Based on this footnote,

the court in Toppings v. Meritech Mortgage Services, Inc., 569
S.E.2d 149 (W. Va. 2002), answered the following question in the
affirmative, without any detailed explanation:
Whether a lender’s form compulsory arbitration clause or
rider, which mandates that all disputes arising out of a
consumer transaction be submitted to a lender-designated
decision maker compensated through a case-volume fee
system whereby the decision maker’s income as an
arbitrator is dependent on continued referrals from the
creditor, so impinges on neutrality and fundamental
fairness that it is unconscionable and unenforceable
under West Virginia law.
569 S.E.2d at 149. While these decisions seem to require a finding
that the choice of the AAA rules renders the clause in this matter
structurally unfair due to the arbitrator being compensated on a
fee-per-case basis, this Court declines to make such finding.

16

Section 2 of the FAA, provides that arbitration agreements
shall be valid under federal law, “save upon such grounds as exist
at law or in equity for the revocation of any contract.”
§ 2 (emphasis added).

9 U.S.C.

As to whether state contract law or the

federal law concerning the FAA applies in certain circumstances,
the Supreme Court in Perry v. Thomas, 482 U.S. 483 (1987), stated
that, “state law, whether of legislative or judicial origin, is
applicable if that law arose to govern issues concerning the
validity, revocability, and enforceability of contracts generally.”
482 U.S. at n.9 (emphasis in original).

Whereas, “[a] state-law

principle that takes its meaning precisely from the fact that a
contract to arbitrate is at issue” is not applicable because it
does not comply with § 2.

Id.

The rule provided in Dunlap

concerning the substantive unconscionability of arbitration when
the arbitrator designated is paid on a fee-per-case basis is not
one that governs issues concerning the validity, revocability, and
enforceability of contracts generally; instead, such rule was
fashioned

to

specifically

deal

with

arbitration

provisions.

Therefore, based on this alone, such state law rule promulgated in
Dunlap is inapplicable as to whether the arbitration clause in the
lease is valid pursuant to the FAA, as it was developed precisely
from

the

fact

that

a

contract

to

arbitrate

was

at

issue.

Accordingly, this Court must rely on federal law regarding whether

17

the designation of an arbitrator on a fee-per-case basis renders an
arbitration clause substantively unconscionable.
The district court for the Southern District of West Virginia
was faced with a similar argument concerning the fees provided to
the appointed arbitrators in Miller v. Equifirst Corp. of WV, No.
2:00-0335, 2006 WL

2571634 (Sept. 5, 2006 S.D. W. Va.).

The court

in Miller found that “Plaintiffs’ speculative arguments in this
case that the [arbitration association] is biased and its rules
will not result in the appointment of an unbiased arbitrator
represent little more than ‘general antipathy to arbitration’ which
both the United States Supreme Court and the Fourth Circuit have
rejected.”

2006 WL 2571634 at *14 (citing and quoting American

General Life and Acc. Ins. Co. v. Wood, 429 F.3d 83, 90 (4th Cir.
2005)).

The

speculative

Supreme

arguments

Court
that

has

expressly

“parties

and

rejected

[an]

parties’

arbitral

body

conducting a proceeding will be unable or unwilling to retain
competent, conscientious and impartial arbitrators.”

Gilmer v.

Interstate/ Johnson Lane Corp., 500 U.S. 20, 30 (1991) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 634 (1985)).

While the fee-per-case method causes plaintiffs

some concern, the plaintiffs have not provided this Court with any
evidence that the process results in an arbitration proceeding that
lacks neutrality such that it would render the arbitration clause
unconscionable.

Accordingly, without evidence the arguments are

18

merely

speculative

and,

thus,

this

Court

must

reject

such

arguments.
The plaintiffs next assert that the arbitration fees render
the clause substantively unconscionable.

The arbitration clause

states in part that “[a]ll fees and costs associated with the
arbitration shall be borne equally by Lessor and Lessee.”
11 Ex. 1 *3.

ECF No.

The plaintiffs assert that based on the defendant’s

estimation of the amount in controversy, the fees would total
$8,700.00, which the plaintiffs assert does not include the cost of
the arbitrator’s compensation, travel, and lodging, which also must
be shared between the parties.

The plaintiffs assert that such a

cost is unreasonably burdensome compared to filing a civil lawsuit,
which cost the plaintiffs $210.00.
In

regards

to

fee-splitting

provisions

in

arbitration

agreements, the Fourth Circuit has stated that the inquiry should
be focused on “whether the arbitral forum in a particular case is
an adequate and accessible substitute to litigation.”

Bradford v.

Rockwell Semiconductor Systems, Inc., 238 F.3d 549, 556 (4th Cir.
2001).

The court in Bradford stated that such an inquiry must be

made on “a case-by-case analysis that focuses, among other things,
upon the claimant’s ability to pay the arbitration fees and costs,
the expected cost differential between arbitration and litigation
in court, and whether that cost differential is so substantial as
to deter the bringing of claims.”

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Id.

This Court has not been presented with any evidence concerning
the plaintiffs’ ability or inability to pay the fees that may be
assessed in arbitration.

The plaintiffs do not contest that Brian

Dytko was paid $41,000.00 to execute the lease in question or that
he further accepted an additional $39,000.00 from the defendant for
surface disturbances.

The plaintiffs also do not compare the

actual costs of litigation beyond the filing fee, with those of
arbitration

to

allow

for

a

proper

differential between the two forums.

comparison

of

the

cost

Accordingly, the plaintiffs’

speculation as to the costs of arbitration, without more, provides
insufficient

support

unconscionability.

for

a

finding

of

substantive

Thus, this Court finds that the arbitration

clause is valid and enforceable as it is neither ambiguous or
unconscionable based on the plaintiffs’ arguments.

Accordingly,

this Court must grant the defendant’s motion to compel arbitration,
at least as to plaintiff Brian Dytko, who is the signatory to the
lease containing the arbitration clause, as the defendant has
established the factors required to compel arbitration as to all
claims pertaining to Brian Dytko.
B.

Non-Signatories to the Lease
The plaintiffs argue that even if Brian Dytko’s claims against

the defendant are subject to arbitration, the remaining plaintiffs,
Holly Dytko, R.D., and J.D., were not signatories to the lease with
the defendant.

Accordingly, the plaintiffs assert that the non-

20

signatories cannot be subject to the arbitration clause, which is
part of a lease that they did not sign.

In response, the defendant

states that the non-signatory plaintiffs are equitably estopped
from avoiding the arbitration clause.

The defendant states,

however, that if this Court were to find that equitable estoppel
does not apply, this Court should stay the claims of the nonsignatory plaintiffs pending the outcome of the arbitration between
Brian Dytko and the defendant.
Initially, this Court notes that there seems to be confusion
between the parties as whether this Court must apply state law or
federal law in deciding this issue.

The Fourth Circuit has

concluded that because the issue of whether a non-signatory may be
bound by an arbitration clause “presents no state law question of
contract formation or validity,” the federal substantive law of
arbitrability applies to resolve such question. Int’l Paper Co. v.
Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, n.4 (4th Cir.
2000).

Federal courts have recognized five theories for binding

non-signatories to arbitration agreements: “1) incorporation by
references; 2) assumption; 3) agency; 4) veil piercing/alter ego;
and 5) estoppel.”

See id. at 417 (quoting Thomson–CSF, S.A. v.

American Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995)).
The defendant argues that the equitable estoppel doctrine
applies in this case, so as to require the non-signatory plaintiffs
to be bound by the arbitration clause.

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“In the arbitration

context, the doctrine recognizes that a party may be estopped from
asserting that the lack of his signature on a written contract
precludes enforcement of the contract’s arbitration clause when he
has consistently maintained that other provisions of the same
contract should be enforced to benefit him.”

Id. at 418.

To allow

otherwise would “disregard equity and contravene the purposes
underlying enactment of the Arbitration Act.”

Id. (quoting Avila

Group, Inc. v. Norma J. of California, 426 F. Supp. 537, 542 (S.D.
N.Y. 1977)).
The benefit sought by the non-signatory pursuant to the
contract must be a direct benefit from the contract.

Id.

A direct

benefit is one flowing directly from the contract, in contrast to
one that flows as a result of the contract formation.

MAG

Portfolio Consult, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58, 61
(2d Cir. 2001) (“The benefits must be direct -- which is to say,
flowing directly from the agreement.”).

To determine whether the

non-signatories are seeking to directly benefit from the contract,
a court must examine whether the non-signatories claims “either
literally or obliquely, assert a breach of a duty created by the
contract containing the arbitration clause.” American Bankers Ins.
Group, Inc. v. Long, 453 F.3d 623, 629 (4th Cir. 2006).
In this instance, the non-signatory plaintiffs are bringing
claims pursuant to West Virginia law for nuisance, negligence, and
intentional tort based on the defendant’s operations on the land

22

subject to the lease.
that

the

The non-signatory plaintiffs are asserting

defendant’s

actions

have

caused

substantial

and

unreasonable interference with their use and enjoyment of their
land and the actions have further caused a significant amount of
air and noise pollution.

These claims do not assert that the

defendant is breaching any duty it had pursuant to the lease
agreement between Brian Dytko and the defendant.

While the

question may arise of whether the defendant had a right to take
such actions and create such pollution pursuant to the lease
agreement, the non-signatory plaintiffs are not trying to directly
benefit from the lease agreement in any way.

Accordingly, this

Court finds that the non-signatory plaintiffs are not equitably
estopped from asserting their claims outside of arbitration.
The defendant requests that this action be stayed if this
Court finds that the non-signatory plaintiffs are not equitably
estopped from asserting their claims outside of arbitration.

The

Fourth Circuit has stated that “[t]he FAA requires a court to stay
‘any

suit

or

proceeding’

pending

arbitration

of

‘any

issue

referable to arbitration under an agreement in writing for such
arbitration.’”

Adkins, 300 F.2d at 500 (quoting 9 U.S.C. § 3).

As

stated above, all claims pertaining to plaintiff Brian Dytko are
subject to arbitration.

These claims include those in which the

non-signatory plaintiffs are parties to.

Accordingly, because

these claims are to be submitted to arbitration as to Brian Dytko,

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this Court finds that it must stay any litigation as to such claims
insomuch as they concern the non-signatory plaintiffs pending the
outcome of the arbitration proceedings.
IV.

Conclusion

For the reasons stated above, this Court DENIES AS MOOT
defendant’s motion to compel arbitration and dismiss plaintiffs’
complaint.

This Court GRANTS IN PART the defendant’s motion to

compel arbitration and dismiss plaintiffs’ first amended complaint
insomuch as it seeks to arbitrate and dismiss those claims of
plaintiff Brian Dytko.
it

concerns

plaintiff

This civil action is DISMISSED insomuch as
Brian

Dytko

and

is

to

be

brought

in

arbitration in accordance with this memorandum opinion and order.
The Clerk is DIRECTED to dismiss this civil action and strike it
from the active docket of this Court insomuch as it concerns
plaintiff Brian Dytko.

As to the remaining claims in the amended

complaint for private nuisance, negligence and intentional tort as
they pertain to plaintiffs Holly Dytko, J.D. and R.D., this Court
DENIES IN PART defendant’s motion to compel arbitration and dismiss
plaintiffs’ first amended complaint.

This Court, however, STAYS

such claims pending the outcome of the arbitration.

The remaining

plaintiffs are DIRECTED to notify this Court upon the conclusion of
the arbitration proceedings.
IT IS SO ORDERED.

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The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

May 30, 2014

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

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