Kwame Allen applied for employment in 2002 with Wyatt V.I., a company that performed various services at the HOVENSA refinery on St. Croix, U.S. Virgin Islands.  As part of his employment application, Allen signed a contract that contained a dispute resolution provision which stated that any controversy would be settled by arbitration in accordance with the rules of the American Arbitration Association.

Allen’s position was that of “Pipefitter Helper.” In September 2004, Allen tripped on a rag and fell down a staircase, after which he filed a complaint against HOVENSA in the Virgin Islands Superior Court. He claimed that his injuries were caused by HOVENSA’s negligence. After two years of little activity, HOVENSA, based on the dispute resolution provision in Allen’s contract, filed a motion to compel arbitration in August 2006. The Superior Court found that the employment agreement was governed by the Federal Arbitration Act (“FAA”) and compelled the parties to enter arbitration. The trial court stayed all proceedings pending the outcome of that arbitration.

The parties appeared before an arbitrator three years later in August 2009. The arbitrator found that Allen did not establish the elements of negligence and awarded no damages. Allen failed to move to vacate the arbitration award, and HOVENSA moved for the Superior Court to confirm the award. In July 2010, the Superior Court granted HOVENSA’s motion and dismissed Allen’s complaint with prejudice. Allen appealed.

Waiver of Right to Compel Arbitration

Allen claimed on appeal that HOVENSA waived its right to invoke the dispute resolution clause in the employment agreement, due to the fact that it waited roughly two years to file the motion to compel arbitration. As a result, Allen argued, HOVENSA benefitted from discovery and in effect consented to having Allen’s claims decided by the Superior Court. HOVENSA said that the two-year delay was caused because it thought they had previously filed a motion to compel arbitration, which it rectified after realizing this.

Justice Ive Arlington Swan, writing the opinion for the Supreme Court of the Virgin Islands, agreed that HOVENSA did not waive its right to compel arbitration. The justice explained that a party waives the right to compel arbitration when it delays invoking the right and prejudice results from the delay. Answering on the merits or participating in discovery—without more—will not constitute a waiver of arbitration. For a waiver to occur, Justice Swan said that the party must have engaged in "extensive discovery” or sought a judicial disposition on the merits, like a motion to dismiss.

Swan and the Virgin Islands Supreme Court also agreed with Allen that the proceedings were delayed as a result of HOVENSA’s apparently inadvertent failure to file the motion. Nevertheless, the court said that the delay by itself did not constitute sufficient prejudice to support waiver. Instead, the party opposing arbitration must show how the delay resulted in prejudice. 

The Supreme Court found that Allen did not met his burden of proving that he suffered any prejudice as a result of the delay, even though the record showed that HOVENSA did not respond to interrogatories, request production of documents, or participate in depositions or court-ordered mediation. Although some discovery did take place, all of the discovery had been initiated by Allen. HOVENSA also didn’t move for dismissal or summary judgment. It only filed an answer, a stipulation for substitution of counsel, and several requests for an extension of time. In other words, Justice Swan said, it didn’t participate in the matter in such a way that required Allen to spend “substantial amounts of time, effort, and money” litigating the matter in the Superior Court before the motion to compel arbitration. Since Allen failed to show prejudice, the Supreme Court held that HOVENSA did not waive its right to enforce the dispute resolution clause, and that the Superior Court did not err in granting the motion to compel arbitration.

The Scope of Dispute Resolution Clause

Allen also argued that the dispute resolution provision in his employment agreement wasn’t intended to cover personal injury claims against HOVENSA. He believed the that the terms of the arbitration agreement were intended to cover "only labor disputes arising out of employment decisions." The Superior Court rejected this argument because the contract was "clearly meant to encompass any controversy or claim arising out of or relating to ‘Employee’s presence at the facility’ including tort claims,” and that “the agreement is clear as to what claims are subject to arbitration and the type of claim brought in this case is specifically identified within the agreement as being subject to arbitration.”

The Supreme Court agreed. The dispute resolution provision clearly stated that it encompasses tort claims. Since Allen’s complaint stated that his injuries occurred at work, his claims clearly fell within the dispute resolution provisions.

The Dispute Resolution Clause is Not Unconscionable

Allen also claimed that, even if the agreement covered his tort claims, that the dispute resolution provision was unconscionable because he was directed to sign the agreement without the opportunity to read or discuss the agreement with a company representative or to negotiate its terms.  Allen claimed that he was told that he would not be hired if he didn’t sign the agreement—that the agreement was unconscionable because it was a contract of adhesion.

The Supreme Court didn’t see it that way.  In his appellate brief, Allen discussed just two terms that he thought were unconscionable. First, Allen argued that the costs of arbitration were prohibitively expensive because the agreement required the employee to advance half of any filing fee required by AAA, up to a maximum of $500. Justice Swan admitted that such a provision could potentially be unconscionable if it resulted in arbitration becoming prohibitively expensive as a means of obtaining redress; however, Allen failed to notice that the agreement also made arrangements for financial hardship or financial inability to pursue the claim.  Even so, Allen was, in fact, actually able to arbitrate his claim as mandated by the Superior Court’s Order, and the arbitrator ruled that the parties would each bear their own costs.

Finally Allen alleged that the agreement was unconscionable because it shortened the statute of limitations to only 180 days.  Justice Swan quoted earlier case law which said that "a provision limiting the time to bring a claim or provide notice of such a claim to the defendant is not necessarily unfair or otherwise unconscionable,’ [but] the time period designated by the agreement must … be reasonable.”  The 180–day limitation period did not impair Allen’s right to arbitrate his claims.  Rather, the record showed that he filed his complaint in the Superior Court less than two weeks after the incident.

For these reasons, the Superior Court orders were affirmed. Allen v. Hovensa, L.L.C., 2013 WL 3976835 (V.I. July 31, 2013).

If you have questions on how employment agreements should be written for your U.S. Virgin Islands business, or any other labor or employment law concerns, contact Ravinder S. Nagi, Chair of the BoltNagi PC Labor and Employment Practice Group.   BoltNagi PC is one of the largest firms in the United States Virgin Islands and has experienced legal professionals to assist companies in the U.S. Virgin Islands.