Where an arbitration agreement included a clause awarding attorneys’ fees to the prevailing party, but the Virginia Values Act only entitles a plaintiff to an award of attorneys’ fees and provides no right for fees to a prevailing defendant, the clause was severed from the agreement.
Ironworks Development LLC suspended and then terminated Rhonda Smith for failure to comply with its COVID-19 vaccination policy. This came after she submitted an accommodation based on sincerely held religious beliefs. Plaintiff asserts multiple claims under Title VII and the Virginia Values Act. The issue now before the court is whether these claims must be submitted to arbitration.
Plaintiff argues that there is no mutual assent to the arbitration provision in the employment agreement and thus no valid contractual relationship between the parties as to the provision. Plaintiff argues that the severability provision “eviscerates any certainty of contractual terms by purporting to permit unlimited and ‘automatic’ amendment of any term found to be unenforceable.” According to plaintiff, the overreach of this provision “prevent[ed] a meeting of the minds on the exact and definite terms of the Agreement in a way that any adjudicator can discern under Virginia law.”
The court severs the portion of the severability provision that allows for automatically adding “a provision as similar in terms to the questioned provision as possible.” Thus, this provision’s existence does not render the entire contract unenforceable. Both parties indicated mutual assent by signing the employment agreement, therein agreeing to the terms as written. The court need not worry about a future concern of blue-penciling at this time.
Plaintiff also argues that the attorneys’ fees provision in the agreement “violates the public policy in Title VII against assessment of fees against an unsuccessful claimant as a matter of course,” therein rendering the agreement void. Plaintiff further argues that the attorneys’ fees provision is unenforceable under Virginia law because the Virginia Values Act only entitles a plaintiff to an award of attorneys’ fees, and state law provides no right for fees to a prevailing defendant.
The current attorneys’ fees provision is likely unenforceable. It states that “[t]he non-prevailing party in arbitration … will be fully responsible for and pay the prevailing Party’s reasonable attorney’s fees, costs, and expenses,” regardless of whether the plaintiff or defendant prevails under a Title VII suit. But this provision is severable, as it is not integral to the parties’ agreement. Thus, it does not invalidate the arbitration agreement. The court severs the attorneys’ fee provision and instructs any arbitrator to follow the traditional attorneys’ fee provision rules for the Title VII claim, as well as the relevant state rules governing state law claims.
Finally, plaintiff asserts that defendant’s “engagement of the discovery methods permitted under the Federal Rules but not under the arbitration rules specified in the Agreement has resulted in actual prejudice to Plaintiff and constitute[s] a waiver of [defendant’s] ability to compel arbitration even were the Agreement enforceable.” But “[e]ven in cases where the party seeking arbitration has invoked the ‘litigation machinery’ to some degree, ‘[t]he dispositive question is whether the party objecting to arbitration has suffered actual prejudice.’”
Defendant moved to compel arbitration around four months after the case began. The Fourth Circuit has previously found no inherent prejudice in a delay around a four-month span. Plaintiff nevertheless argues that she has been prejudiced by discovery. She discusses that defendant “served interrogatories, document requests, and requests for admissions on Plaintiff, both initially and then as amended.” Plaintiff discusses that she “responded to the discovery and produced responsive documents in accordance with the Federal Rules.”
“Because the written discovery conducted here was limited, the parties had not proceeded with time-consuming and expensive depositions, and [the non-moving party] demonstrates no resulting disadvantage,” the court finds that plaintiff has not “carried its ‘heavy burden’ of establishing that it was prejudiced by the pre-trial activity conducted prior to [the] motion to compel arbitration.”
Defendant’s motion to compel arbitration granted.
Smith v. Ironworks Development LLC, Case No. 3:22-cv-20, Oct. 14, 2022. WDVA at Charlottesville (Moon). VLW 022-3-477. 18 pp.