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This page is a compilation of some of the recent developments in our firm’s Practice Areas. To check for updates in your area of interest, simply click on the Practice Area to your left.

Alternative Dispute Resolution

Arthur Andersen LLP v. Carlisle, 129 S.Ct. 1896 (U.S. 2009).
Docket No. 08-146, decided May 4, 2009.

Multiple plaintiffs filed suit against an accounting firm and other others alleging fraud, civil conspiracy, malpractice, breach of fiduciary duty, and negligence. The defendants demanded arbitration pursuant to a provision in investment agreements between the plaintiffs and one of the defendants and moved to stay the action under § 3 of the Federal Arbitration Act (FAA). The district court denied the motions and the defendants appealed, but the United States Court of Appeals for the Sixth Circuit dismissed the appeal for want of jurisdiction. However, the United States Supreme Court reversed, finding that the district court’s interlocutory order denying a stay under § 3 of the FAA was immediately appealable. The court held that any litigant who asks for a stay under § 3 is entitled to an immediate appeal from denial of that motion regardless of whether the litigant is in fact eligible for a stay.

Widener v. Fort Mill Ford, 381 S.C. 522, 674 S.E.2d 172 (Ct. App. 2009).
Opinion No. 4490, decided January 27, 2009.

The plaintiff sued a car dealer for alleged violations of the South Carolina Unfair Trade Practices Act and the South Carolina Regulation of Manufacturers, Distributors, and Dealers Act. The dealer moved to dismiss or stay the litigation and to compel arbitration. The trial court dismissed the action and referred the dispute to arbitration, but the South Carolina Court of Appeals reversed. The court held that because the trial court dismissed the action rather than staying it, the order was final and appealable. The court further held that it was error for the trial court to dismiss the action because any future actions could be barred by the statute of limitations, and thus dismissal was prejudicial to the plaintiff. Therefore, the court remanded the case with instructions for the trial court to enter an order staying the action pending the arbitration proceedings.

Forrester v. Penn Lyon Homes, Inc., 553 F.3d 340 (4th Cir. 2009).
Docket No. 07-2171, decided January 21, 2009.

The plaintiffs filed suit in state court asserting claims arising out of the construction and installation of a modular home. The defendants removed the action to federal court and filed an answer denying the material allegations of the complaint. The defendants’ answer did not assert mandatory arbitration as an affirmative defense. For the next two years, the parties engaged in extensive discovery, followed by failed settlement negotiations. After the settlement negotiations failed, the defendant filed a motion to compel arbitration on the basis of an arbitration provision in the plaintiff’s structural warranty. The district court denied the motion, holding that the defendants defaulted their right to arbitration by waiting over two years and until nearly all pretrial preparations had been completed to request arbitration. On appeal, the United States Court of Appeals for the Fourth Circuit affirmed. The court held that although under the Federal Arbitration Act delay and participation in litigation do not by themselves constitute default of the right to arbitrate, the defendants had so substantially utilized the litigation machinery that to permit arbitration would prejudice the plaintiffs, who had expended significant time and money responding to the defendants’ motions and preparing for trial.

Qorvis Communications, LLC v. Wilson, 549 F.3d 303 (4th Cir. 2008).
Docket No. 07-1967, decided December 3, 2008.

A political consultant entered into an employment agreement in which he agreed to devote his full time and energy to developing and building a division of his employer’s company and to forego soliciting clients for his own business. However, he continued to provide political consulting work outside of his employment with the company, so the company terminated him and filed this lawsuit, asserting breach contract, breach of loyalty, and several other causes of action. The defendant asserted mandatory arbitration as an affirmative defense based on a provision in the employment agreement, and the district court ordered the parties to arbitration. After the arbitrator entered an award for the company, the district court entered a judgment against the defendant. The defendant appealed, arguing that the court lacked the authority under the employment agreement to confirm the arbitration award. However, the United States Court of Appeals for the Fourth Circuit held that language of the arbitration clause, together with the conduct of the parties, indicated that the parties agreed and intended that arbitration be final and enforceable in court.

Timmons v. Starkey, 380 S.C. 590, 671 S.E.2d 101 (Ct. App. 2008).
Opinion No. 4459, decided November 20, 2008.

The plaintiff executed a durable power of attorney naming her daughter as attorney-in-fact. Subsequently, the daughter allegedly removed $129,000 from the plaintiff’s investment accounts and used the funds for her personal benefit. The plaintiff filed this action against her daughter and investment bank seeking damages for conversion. Both defendants moved to compel arbitration on the basis of a broadly worded arbitration clause in the plaintiff’s contract with the investment bank, but the trial court denied the motions, holding that the plaintiff’s claims were completely independent of the contract. On appeal, the South Carolina Court of Appeals reversed, finding that there was a “significant relationship” between the plaintiff’s claims and the contract. The court found that the plaintiff’s claims were not based on outrageous and unforeseeable conduct which would place them outside the scope of the contract’s arbitration clause.

New Hope Missionary Baptist Church v. Paragon Builders, 379 S.C. 620, 667 S.E.2d 1 (Ct. App. 2008).
Opinion No. 4433, decided August 27, 2008.

A contractor entered into an agreement with a church to oversee the construction of a new church facility, and the church paid the entire $25,000 fee in advance. Subsequently, the church filed this declaratory judgment action alleging that the agreement was invalid because it was not properly authorized by church personnel and the signatures on the agreement were forgeries. The contractor moved to compel arbitration based on the arbitration provision in the agreement, but the circuit court denied the motion. On appeal, the South Carolina Court of Appeals reversed, holding that because the church did not specifically challenge the arbitration provision, but instead challenged the validity of the entire agreement, the dispute was subject to arbitration.

Hatcher v. Edward D. Jones & Co., L.P., 379 S.C. 549, 666 S.E.2d 294 (Ct. App. 2008).
Opinion No. 4431, decided August 14, 2008.

The plaintiff opened a Roth IRA with the defendant and deposited over $100,000 into the account. Subsequently, the majority of those funds were withdrawn without his permission into the account of a third person. The plaintiff brought an action against the defendant for breach of contract, breach of contract accompanied by a fraudulent act, negligence, breach of fiduciary duty, and violation of the South Carolina Unfair Trade Practices Act (SCUTPA). The defendant moved to compel arbitration based on a broadly-worded arbitration provision in the parties’ agreement, but the circuit court denied the motion. On appeal, the South Carolina Court of Appeals reversed as to the breach of contract, breach of contract accompanied by a fraudulent act, and breach of fiduciary duty claims, holding that those claims alleged a breach of the parties’ agreement and were therefore subject to arbitration. However, the court affirmed as to the negligence and SCUTPA claims, holding that under Aiken v. World Finance Corp. of South Carolina, 373 S.C. 144, 644 S.E.2d 705 (2007), the arbitration provision could not be applied to alleged actions which were completely outside the expectations of the parties at the time they entered into the agreement.

Partain v. Upstate Automotive Group, 378 S.C. 152, 662 S.E.2d 426 (Ct. App. 2008).
Opinion No. 4373, decided April 23, 2008.

The plaintiff negotiated with a dealer for the purchase of a vehicle. During the negotiations, he test drove the vehicle several times. After signing the purchase paperwork and driving the vehicle home, he discovered that it was not the vehicle that he had test-driven and intended to buy. He subsequently filed a claim against the dealer under the South Carolina Unfair Trade Practices Act. The dealer moved to dismiss the action and compel arbitration pursuant to an arbitration clause in the purchase agreement. The trial court denied the motion and allowed the lawsuit to proceed, but the South Carolina Court of Appeals reversed, finding that there was a “significant relationship” between the plaintiff’s claim and the purchase agreement. Furthermore, the court found that the plaintiff’s allegations against the dealer were not “illegal and outrageous acts that were unforeseeable to a reasonable consumer in the context of normal business dealings.” Therefore, the court held that the dispute must be submitted to arbitration.

Hall Street Associates, LLC v. Mattel, Inc., 128 S.Ct. 1396 (2008).
Docket No. 06-989, decided March 25, 2008.

A landlord filed suit against its tenant and the parties agreed to submit one of the issues in the suit to arbitration. Their arbitration agreement provided that a reviewing court shall modify, vacate, or correct any award “where the arbitrator’s conclusions of law are erroneous.” However, a finding that the arbitrator’s conclusions of law are erroneous is not one of the bases for modification, vacation, or correction of an arbitration award under §§ 10-11 of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq. The United States Supreme Court, resolving a split among the circuit courts, held that the statutory grounds for modification, vacation, or correction of an award found in §§ 10-11 of the FAA are exclusive, rather than mere threshold provisions open to expansion by agreement, rendering unenforceable the provision in the parties’ agreement that a court may modify, vacate, or correct an award on the basis of the arbitrator’s error of law.

MBNA America Bank, N.A. v. Christianson, 377 S.C. 210, 659 S.E.2d 209 (Ct. App. 2008).
Opinion No. 4349, decided March 4, 2008.

A bank filed an arbitration claim against a debtor, claiming that he had defaulted on credit card agreement. The debtor repeatedly objected to the claim, asserting that he had never agreed to arbitrate. Despite the debtor’s objections, the arbitration continued and resulted in an award against the debtor. When the bank sought to confirm the award, the circuit court granted the debtor’s motion to vacate the award. On appeal, the bank argued that the debtor’s motion to vacate was untimely. However, the South Carolina Court of Appeals held that because the debtor objected to the arbitration, the arbitrator had no jurisdiction to make an award until the issue of arbitrability was determined by a court. Because the bank never moved to compel arbitration, no court ever decided the arbitrability issue, and therefore the vacation of the award was affirmed due to the arbitrator’s lack of jurisdiction.

Choice Hotels Int’l v. SM Property Mgmt., LLC, 519 F.3d 200 (4th Cir. 2008).
Docket No. 05-1979, decided February 28, 2008.

The defendants in this franchise dispute moved to vacate an arbitration award for lack of notice of the arbitration hearing. The district court granted the motion vacating the award and the plaintiffs appealed. On appeal, the United States Court of Appeals for the Fourth Circuit noted that in order to vacate an arbitration award, the moving party must sustain the heavy burden of showing one of the grounds specified in the Federal Arbitration Act, 9 U.S.C. § 10(a), or one of certain limited common law grounds. The court affirmed the vacation of the award because the defendants showed that the “award fail[ed] to draw its essence from the contract,” one of the limited common law grounds for vacation, because notice was not provided in accordance with the Commercial Rules of the American Arbitration Association as required by the franchise agreement.

Preston v. Ferrer, 128 S.Ct. 978 (2008).
Docket No. 06-1463, decided February 20, 2008.

An attorney sought fees allegedly due under his contract with the Fox television network’s “Judge Alex.” He invoked the arbitration provision of the contract, which required the arbitration of any dispute relating to the terms, validity, or legality of the contract as well as its breach. However, a Los Angeles trial court denied the motion to compel arbitration and enjoined the attorney from proceeding before the arbitrator unless and until the California Labor Commissioner found that she lacked jurisdiction. The California Court of Appeals affirmed the trial court and the California Supreme Court denied review. However, the United States Supreme Court reversed, holding that the parties’ transaction involved interstate commerce, and therefore when the parties agreed to arbitrate all questions arising under the contract, any state laws lodging primary jurisdiction in another forum, whether judicial or administrative (such as the Labor Commissioner), were superseded by the Federal Arbitration Act.

In re Cotton Yarn Antitrust Litigation, 505 F.3d 274 (4th Cir. 2007).
Docket No. 05-2392, decided October 12, 2007.

In this class action lawsuit, the plaintiffs sued various yarn manufacturers over their alleged participation in a price-fixing conspiracy in violation of the federal Sherman Act. The defendants moved to dismiss as to certain plaintiffs on the basis of arbitration clauses in their purchase agreements. The district court found that no plaintiff was required to submit its claims to arbitration, but the United States Court of Appeals for the Fourth Circuit held that the arbitration of disputes is a well-established custom in the textile industry and thus was automatically a part of any agreements between the parties, whether oral or written, as a “usage of trade.” Therefore, the court found that all plaintiffs were required to submit their claims to arbitration. Furthermore, the court held that the arbitration clauses were broad enough to encompass the plaintiffs’ antitrust claims and that the plaintiffs had failed to carry their burden of showing that they could not effectively vindicate their statutory rights through arbitration.

Three S Delaware, Inc. v. DataQuick Information Systems, Inc., 492 F.3d 520 (4th Cir. 2007).
Docket No. 06-1227, decided July 12, 2007.

The plaintiff submitted claims to arbitration and the defendant filed counterclaims. The plaintiff walked out of the arbitration proceedings and the arbitrator subsequently awarded the defendant $6.1 million on its counterclaims. On appeal, the United States Court of Appeals for the Fourth Circuit upheld the district court’s denial of the plaintiff’s motion to vacate the arbitration award because the plaintiff could not show that the award violated one of the grounds specified in the Federal Arbitration Act, 9 U.S.C. § 10(a), or one of certain limited common law grounds, such as where an award fails to draw its essence from the contract or the award evidences a manifest disregard of the law.

Choice Hotels Intern., Inc. v. Shiv Hospitality, LLC, 491 F.3d 171 (4th Cir. 2007).
Docket No. 05-2201, decided June 20, 2007.

A breach of contract dispute between the parties was submitted to arbitration. The plaintiff received an award from the arbitrator and the plaintiff asked the district court to confirm the arbitration award. The court confirmed the award over the objection of the defendant, holding that the defendant’s claims contesting confirmation were time barred. On appeal, the United States Court of Appeals for the Fourth Circuit noted that 9 U.S.C. § 12 requires a party to contest an arbitration award within three months of its filing. Because the defendant missed the deadline by six months and could offer no reason for why it chose to wait until the plaintiff sought to confirm the award before attempting to vacate the award, the court upheld the award.

Rhodes v. Benson Chrysler-Plymouth, Inc., 374 S.C. 122, 647 S.E.2d 249 (Ct. App. 2007).
Opinion No. 4222, decided May 31, 2007.

The plaintiff sued a car dealership for breach of contract in connection with the purchase of a vehicle. The dealer pleaded in its answer that the contract between the parties contained an arbitration provision encompassing the plaintiff’s allegations, but the dealer did not initially pursue arbitration, opting instead to engage in extensive discovery. Some ten months after the action was initiated and on the eve of trial, the dealer moved to compel arbitration. The South Carolina Court of Appeals affirmed the denial of the motion based on case law stating that a party waives its right to enforce an arbitration provision when it delays demanding arbitration and engages in extensive discovery, resulting in prejudice to the opposing party.

Chassereau v. Global Sun Pools, Inc., 373 S.C. 168, 644 S.E.2d 718 (2007).
Opinion No. 26318, decided April 23, 2007.

The plaintiff sued the installer of her above-ground pool for defamation and infliction of emotional distress. The installer moved to compel arbitration based on an arbitration clause in the financing agreement between the parties. The South Carolina Supreme Court held that the case was controlled by the principle pronounced in Aiken v. World Finance Corp. that a party may not be forced to arbitrate claims of illegal or outrageous conduct that no reasonable person would have foreseen at the time the parties executed the arbitration agreement.

Aiken v. World Finance Corp. of South Carolina, 373 S.C. 144, 644 S.E.2d 705 (2007).
Opinion No. 26313, decided April 23, 2007.

The plaintiff alleged various causes of action against a finance company alleging misuse of personal finance information he provided in connection with a loan. The finance company moved to compel arbitration based on an arbitration agreement the plaintiff signed during the loan process. The South Carolina Supreme Court noted that although arbitration is favored by state and federal law, it is a matter of contract and a party cannot be required to arbitrate disputes that he did not agree to arbitrate. Because the plaintiff alleged outrageous torts that were unforeseeable in the context of normal business dealings, his claims were not within the scope of the arbitration agreement.

Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 644 S.E.2d 663 (2007).
Opinion No. 26293, decided March 26, 2007.

The plaintiff filed suit alleging multiple causes of action against a car dealership. The dealership pointed to an arbitration clause in the contract between the parties and moved to stay the lawsuit and compel arbitration. The South Carolina Supreme Court found that the arbitration clause was unconscionable and unenforceable because the customer had no meaningful choice but to accept the dealership’s terms and the clause contained one-sided terms limiting the customer’s statutory remedies but not the dealership’s and prohibiting the customer from suing for breach of warranty. The court also held that a trial court, not an arbitration proceeding, was the proper forum for determining the enforceability of the arbitration clause.

 

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