June 2007
Supreme Court of Virginia Overturns Judgment That Compelled Plaintiff To Arbitrate His Personal Injury Claim
By C. Dewayne Lonas
The Supreme Court of Virginia recently overturned the judgment of the Circuit Court of Fairfax County that compelled a personal jury plaintiff to arbitrate his claims with the defendant's insurance carrier. The decision, styled Phillips v. Mazyck (Record No. 061183, April 20, 2007), held that the plaintiff and the carrier, USAA, did not reach a "meeting of the minds" on a pre-litigation proposal to arbitrate plaintiff's claims and allowed plaintiff to prosecute his claims in court.
The plaintiff's lawyer originally proposed the idea of binding arbitration with a "high-low" provision to USAA after traditional means of negotiations failed. USAA agreed to the concept of arbitration, but suggested a different "high-low" and insisted that USAA's attorney have the opportunity to conduct liability and damages discovery. The parties ultimately agreed on the parameters of the "high-low" provision and the arbitrator who would attempt to resolve the dispute. Later, USAA's attorney sent written discovery to the plaintiff's lawyer and requested the plaintiff undergo an independent medical examination (IME). Eventually the arbitrator sent both lawyers an arbitration agreement, which the plaintiff's attorney signed but never returned because he wished to see the results off the IME. The plaintiff's lawyer later received a revised arbitration agreement, which be signed and did not return for the same reason.
The doctor who performed the IME recommended that the plaintiff undergo surgery. As a result, the plaintiff's lawyer elected not to arbitrate the plaintiff's claims. The plaintiff then filed suit.
The defendant filed a plea in bar seeking dismissal of the plaintiff's lawsuit. The defendant argued that the parties had reached an agreement to arbitrate which prevented the plaintiff's suit from going forward. The defendant alternatively moved the circuit court to stay the proceedings and compel the parties to arbitration under Virginia Code § 8.01-581.02.
The circuit court agreed with the defendant, holding that all the essential terms of 8.01-581.02 were met in the revised arbitration agreement: the agreement was in writing and signed by the plaintiff's agent (i.e., his lawyer), the party to be charged with its terms. The circuit court then stayed the lawsuit and ordered the parties to arbitration. After the arbitration, the court entered a final order and dismissed the plaintiff's case.
On appeal, the plaintiff challenged the circuit court's ruling on two grounds: (1) that the revised arbitration agreement did not meet the requirements of a written arbitration agreement pursuant to Code § 8.01-581.01, and (2) the parties did not reach a meeting of the minds on the essential terms of the agreement. The Supreme Court focused its analysis on the plaintiff's second argument.
First, the Court held that the common law of contracts governs the question of whether an agreement to arbitrate exists. Second, under basis principles of contract law, no agreement exists absent "mutuality of assent-the meeting of the minds of the parties." Further, because the agreement was controlled by the common law of contracts, and not the Uniform Commercial Code, the parties were required to agree "on every material phase of the alleged agreement."
The Supreme Court found the necessary mutuality lacking. First, the Court uncovered no evidence that USAA assented to the terms of the revised arbitration agreement. Neither the original nor the revised arbitration agreement contained any reference to USAA's condition that it conduct discovery before arbitrating the plaintiff's claim. In addition, the arbitration agreement did not contain the dates USAA insisted on for some of the pre-arbitration discovery. Finally, USAA's silence in responding to the arbitrator's transmission of the revised arbitration agreement did not constitute a tacit assent to its terms.
The Court also found that the plaintiff attorney's refusal to forward the arbitration agreement to USAA after he signed it signified that the plaintiff also did not assent to the terms of the revised arbitration agreement. In short, the Court held that neither party had assented to the writing on which the circuit court had compelled arbitration of the plaintiff's claims. The Supreme Court, therefore, reversed the circuit court's judgment and remanded the case for trial.
The Supreme Court's decision in Phillips v. Mazyck is less a statement about the Commonwealth's policy on arbitration than a reaffirmation of traditional contract principles. Aside from the benefits that may be achieved from arbitration-a potentially swifter resolution, reduced congestion in the courts' dockets-the courts in Virginia will look first to whether the parties actually agreed to arbitrate. If not, the parties may be left with a traditional courtroom setting in which to vet their complaints.
The lawyers in our Commercial Litigation, and Construction Law and Litigation groups collectively possess several decades of experience litigating and arbitrating claims, and drafting agreements to arbitrate. Please contact the author of this article, C. Dewayne Lonas, for further information.