Ky coal company bound by WV company's arbitration clause - WOWK 13 Charleston, Huntington WV News, Weather, Sports

4th Circuit: KY coal company bound by WV company's arbitration clause

Posted: Updated:
  • Local NewsLocal NewsMore>>

  • UPDATE: Route 2 now open following tractor trailer accident

    UPDATE: Route 2 now open following tractor trailer accident

    Monday, August 25 2014 4:00 PM EDT2014-08-25 20:00:48 GMT
    A tractor trailer is blocking part of Route 2. The road is closed until further notice. Drivers heading in both direction are being asked to use the Big Ben Bowen Highway connector by Target to get around.
    A tractor trailer is blocking part of Route 2. The road is closed until further notice. Drivers heading in both direction are being asked to use the Big Ben Bowen Highway connector by Target to get around.

A Kentucky coal sales company didn't have to receive a West Virginia coal marketing company's incorporated terms and conditions to be bound by them, the 4th Circuit Court of Appeals recently ruled.

The case stems from an arbitration dispute between Logan & Kanawha Coal Co. LLC against Detherage Coal Sales LLC.

Seeking to purchase several tons of coal from the Alma Seam Coal from Detherage, Logan sent a fax to the Kentucky company, saying the terms and conditions were attached. Yet, the terms and conditions were not attached.

"The fact that the contract actually appended no following pages is of little moment since the party challenging incorporation need not have actually received the incorporated terms in order to be bound by them, especially where, as here, it is a sophisticated business entity," the 4th Circuit's opinion states. 

However, court documents continued, Detherage never asked about them.

Documents note Detherage's owner had conducted business with Logan before under his other businesses and had previously received the terms and conditions.

These terms and conditions he had received before included a label change from "general" to "standard" terms and conditions, which contained an identical arbitration provision.

"Once we impute Detherage's familiarity with L&K's arbitration clause to DCS, there is no viable claim of hardship or surprise," the opinion states. "Moreover, even if we put aside Detherage's imputed knowledge, DCS's claim of surprise is undercut by the fact that when L&K appended its standard terms and conditions to its May 2010 demand for assurances, DCS raised no objection to their applicability before beginning performance," the 4th Circuit's opinion states.

Logan said that no coal was delivered in April because DCS said it was having production problems. Court documents stated a Logan representative visited the Detherage mine and said it found coal was being mined and shipped but to another customer.

Logan then sent a letter to Detherage demanding assurance of performance and including the contract and the arbitration clause in its terms and conditions.

Court documents state Detherage did not object to these terms and conditions and delivered "a fraction of the promised coal" within the designated time frame.  

Logan then filed a demand for arbitration arguing Detherage breached its contract and the "standard" terms and conditions.

Detherage later filed a motion to dismiss, arguing it never agreed to arbitration.

In a later arbitration hearing, the panel found Detherage indeed agreed to arbitrate and awarded Logan approximately $2.7 million.

Logan then filed a motion in U.S. District Court for the Southern District of West Virginia to confirm this award and Detherage filed a motion to vacate.

The federal court judge vacated the $2.7 million award and Logan appealed the case to the 4th Circuit.  

The federal judge also ruled that Logan's arbitration clause was not "incorporated in the contract by reference" because it was not "clearly referenced."

The judge additionally said since Logan used standard and general terms and conditions and neither was referenced in the purchase order, "which only referred to ‘all terms and conditions on the following pages.'"

The court ruled "it is not clear which document the statement seeks to incorporate" since Logan didn't distinguish between these two terms and conditions. 

In the appeal to the 4th Circuit, Detherage argued that since no following pages were included, the understanding was that these terms and conditions were "boilerplate" and had "no effect on the transaction.

However, the 4th Circuit disagreed, saying that the reference to "all terms and conditions on the following pages," there is a clear reference to a second document.

The opinion additionally said the secondary document was "sufficiently ascertainable despite the existence of two slightly different sets of terms and conditions, neither of which the contract explicitly referenced."

"Even if the two different versions of L&K's terms and conditions could have created some uncertainty about which set applied, DCS can hardly claim to have been legitimately confused about the applicability of the arbitration clause, since both versions contained the same arbitration provision," the opinion states.

"In any case, if DCS was truly confused about which set of terms and conditions applied, it had a duty as a seasoned merchant to affirmatively seek clarification on that point rather than blindly assume the language to be ineffectual," the opinion continued.

The 4th Circuit ruled that the case was arbitratable and also affirmed the award.