SC Lawyer, September 2008, #1. Arbitration: Alive and Delivering Results in South Carolina.

• Author: By Thad H. Westbrook and A. Mattison Bogan

South Carolina Lawyer

2008.

SC Lawyer, September 2008, #1.

Arbitration: Alive and Delivering Results in South Carolina

South Carolina LawyerSeptember 2008Arbitration: Alive and Delivering Results in South CarolinaBy Thad H. Westbrook and A. Mattison BoganThe prevalence of arbitration as a method of dispute resolution has increased dramatically in the United States since the mid-1990s. See Quantitative Economics and Statistics Practice, Ernst & Young, Outcomes of Arbitration: An Empirical Study of Consumer Lending Cases 4 (2005). This trend continued last year as the American Arbitration Association reported a 46 percent increase in commercial arbitration filings. See AAA's Commercial Caseload Up 46 Percent in 2007, Dispute Resolution Times, June 16, 2008. As the prevalence of arbitration actions expands, so does the number of cases interpreting and enforcing arbitration statutes. For many years, South Carolina's courts, and other courts throughout the United States, were antagonistic to arbitration and were hesitant to compel parties to arbitrate. See David S. Clancy & Matthew M.K. Stein, An Uninvited Guest: Class Arbitration and the Federal Arbitration Act's Legislative History, 63 Bus. Law. 55, 58 (Nov. 2007). However, after the adoption of the Federal Arbitration Act (FAA) and the South Carolina Uniform Arbitration Act (SCUAA), the U.S. Supreme Court and the S.C. Supreme Court have developed a body of case law adopting strong policies in favor of arbitration.

This area of the law continues to develop, which is evident from a handful of decisions filed by the S.C. Supreme Court last year and discussed below. See Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 644 S.E.2d 705 (2007); Simpson v. World Fin. Corp. of S.C., 373 S.C. 178, 644 S.E.2d 723 (2007); Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 644 S.E.2d 663 (2007); Chassereau v. Global-Sun Pools, Inc., 373 S.C. 168, 644 S.E.2d 718 (2007). In these decisions, the Court reaffirms its strong polices favoring the enforcement of arbitration agreements, but they also reveal that the Court will continue to examine the use of these agreements and the circumstances surrounding the parties' execution of the agreements. Therefore, any attorney advising clients about drafting, using or enforcing arbitration agreements should study the development of arbitration case law in South Carolina and take note of the Court's most recent decisions. This article seeks to aid in that effort by offering a brief review and update of arbitration decisions in South Carolina.

Early history of arbitration in South Carolina

South Carolina's earliest residents utilized arbitration as a form of dispute resolution, and its courts have always been empowered to enforce arbitration agreements. See, e.g, Delesline v. Greenland, 1 S.C.L. 458 (S.C. Com. Pl. Gen. Sess. 1795). Recognition and enforcement of arbitration agreements was a part of English common law tradition, which first evolved from secular and ecclesiastical courts as early as the 13th century. See Edward Powell, Settlement of Disputes by Arbitration in Fifteenth-Century England, 2 Law & Hist. Rev. 21, 25 (1984). Because South Carolina's law is derived from English common law, the state also adopted English rules permitting and enforcing arbitration agreements. See Bishop v. Valley Falls Mfg. Co., 78 S.C. 312, 58 S.E. 939 (1907). However, "[i]n early times the disposition of the courts was to look with jealousy on arbitrations, and give them as little force as possible . . . " Id. South Carolina courts were wary of agreements that took the dispute outside the rule of the court, and the S.C. Supreme Court previously explained that "[i]t is well established in South Carolina that general arbitration agreements which oust the South Carolina circuit court from jurisdiction are unenforceable as against public policy." Episcopal Housing Corp. v. Federal Ins. Co., 269 S.C. 631, 636, 239 S.E.2d 647, 649 (1977) (citing Childs v. Allstate Insurance Co., 237 S.C. 455, 117 S.E.2d 867 (1961)). The Court followed that statement by saying that "[i]t is equally true, however, that under the supremacy clause of the United States Constitution, Article VI, Clause 2, this Court must recognize that federal statutes enacted pursuant to the U.S. Constitution are the supreme law of the land. The Federal Arbitration Act was enacted pursuant to the commerce clause, thereby superseding the South Carolina common law." Id. at 636, 239 S.E.2d at 649.

Development of arbitration law in the United States and South Carolina

Although South Carolina's courts historically viewed arbitration agreements with skepticism, the current sentiment favoring arbitration indicates times have changed. The general judicial dislike for arbitration is what led many states, including South Carolina in 1978, to follow Congress and create statutes empowering agreements to arbitrate. See Bishop, 78 S.C. at 315-16, 58 S.E.2d at 940. Indeed, the S.C. Supreme Court has acknowledged that the "basic purpose of the FAA is to overcome state courts' refusal to enforce arbitration agreements." Zabinski v. Bright Acres Assoc., 346 S.C. 580, 590-91, 553 S.E.2d 110, 115 (2001) (citing Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265 (1995)).

Today, arbitration agreements in South Carolina are governed by the Uniform Arbitration Act, S.C. Code Ann. §§ 15-48-10, et seq., and the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq. The S.C. Supreme Court has recognized this link between the SCUAA and FAA because the applicability of the state act is impacted by the implementation and interpretation of the federal act in resolving disputes over questions of arbitration. Soil Remediation Co. v. Nu-Way Envtl., 323 S.C. 454, 476 S.E.2d 149 (1996). Given the federalization of arbitration, South Carolina's courts must examine the applicability of the FAA. For example, South Carolina courts, before and after the adoption of the FAA, held "[t]he Federal Arbitration Act supersedes the South Carolina common law rule that arbitration agreements are unenforceable as contracts to oust the courts of jurisdiction." Plaza Develop. Servs. v. Joe Harden Builder, Inc., 296 S.C. 115, 118, 370 S.E.2d 893, 895 (Ct. App. 1988) (citing Episcopal Housing Corp. v. Federal Ins. Co., 269 S.C. 631, 239 S.E.2d 647 (1977)), overruled on other grounds by Link v. School Dist., 302 S.C. 1, 393 S.E.2d 176 (1990).

South Carolina took its lead from the U.S. Congress, which adopted the FAA in 1924. In doing so, Congress explained that "[t]he desire to avoid the delay and expense of litigation persists. The desire grows with time and as delays and expense increase. The settlement of disputes by arbitration appeals to big business and little business alike, to corporate interests as well as to individuals." See S. Rep. No. 68-536, at 3 (1924). Similar to the approach taken by South Carolina's early courts, the enactment of the FAA did not immediately change the court system's attitude toward arbitration agreements. However, starting in the mid-1980s, decisions from the U.S. Supreme Court made it clear that the FAA's impact was far and wide. See Linda R. Hirshman, The Second Arbitration Trilogy: The Federalization of Arbitration Law, 71 Va. L. Rev. 1305 (1985) (explaining the Supreme Court's fulfillment of the promise to expand the ambit of the FAA with its decisions in Moses H. Cone Mem'l Hospital v. Mercury Construction Corp., Southland Corp. v. Keating and Dean Witter Reynolds Inc. v. Byrd, (a/k/a the Trilogy)).

The FAA declares a liberal policy favoring arbitration. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). As a result, decisions from courts across the country have reflected a continuing movement toward the acceptance of arbitration. Now it is uniform that the choice of arbitration is simply the substitution of one decision-making forum for another, without the loss of substantive rights. See Mark Berger, Arbitration and Arbitrability: Toward an Expectation Model, 56 Baylor L. Rev. 753 (2004) (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991) ("[B]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.").

For the FAA to apply, the commerce involved in the contract must be interstate or foreign. Timms v. Greene, 310 S.C. 469, 427 S.E.2d 642 (1993). Therefore, for most matters, a court must determine whether the contract giving rise to the transaction between the parties involves interstate commerce. Soil Remediation Co., 323 S.C. at 460, 476 S.E.2d at 152. The FAA applies if the transaction involves "commerce among the several States or with foreign nations . . . " Id. (quoting 9 U.S.C. § 1). In determining the impact on interstate commerce, the court must examine the agreement, the complaint and the facts to ascertain whether the transaction involves commerce within the meaning of the FAA. SeeBlanton v. Stathos, 351 S.C. 534, 540, 570 S.E.2d 565, 568 (Ct. App. 2002).

Because interstate commerce is a necessary ingredient for application of the FAA, a contract or agreement not involving interstate commerce, which is rare, will be governed by state law. Timms, 310 S.C. at 473, 427 S.E.2d at 644; see also Osteen v. T.E. Cuttino Constr. Co., 315 S.C. 422, 426, 434 S.E.2d 281, 283 (1993) (stating that "the FAA does not prevent enforcement of agreements to arbitrate under different rules than those set forth in the FAA itself, as long as the rules do not undermine the goals and policies of the FAA to ensure the enforceability, according to their terms, of private agreements to arbitrate.") (citing Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 476-79 (1989)). However, if the arbitration agreement at issue in the case or controversy is covered by the FAA, the FAA preempts or "trumps" the SCUAA. See Zabinski, 346 S.C. at 591, 553 S.E.2d at 115; Blanton, 351 S.C. at 539-40, 570 S.E.2d at 568.

Following the adoption of the SCUAA in 1978, South Carolina's courts have viewed arbitration more favorably and have responded more positively to arbitration by requiring all doubts about whether a dispute is arbitrable to be resolved in favor of arbitration. Toler's Cove Homeowners Ass'n, Inc. v. Trident Constr. Co., 355 S.C. 605, 611, 586 S.E.2d 581, 584 (2003). South Carolina courts have acknowledged that the efficiency of arbitration makes it a more appealing form of dispute resolution than a lawsuit because "arbitration is not litigation carried on by other means. It is intended to be, and it is, an alternative means for resolving disputes without the cost and delay of a lawsuit." White v. Preferred Research, Inc., 315 S.C. 209, 212, 432 S.E.2d 506, 508 (Ct. App. 1993). As a result, South Carolina's courts have uniformly held that "[a]rbitration is a favored method of settling disputes in South Carolina." Pittman Mortgage Co. v. Edwards, 327 S.C. 72, 75, 488 S.E.2d 335, 337 (1997) (citing Batten v. Howell, 300 S.C. 545, 389 S.E.2d 170 (Ct.App.1990)).

The body of case law interpreting arbitration statutes and enforcing agreements continues to develop in South Carolina. The federalization of arbitration and the subsequent response from the courts has driven the need for South Carolina's lawyers to monitor state appellate court decisions effecting arbitration. However, several recent opinions from the S.C. Supreme Court, which are outlined below, discuss reasons why and circumstances when some arbitration agreements will not be enforced. A careful look at the reasoning of each of these recent cases is warranted in order to properly place them into the framework established by our state courts' previous decisions in this area.

Recent arbitration decisions from the S.C. Supreme Court

Last year, the S.C. Supreme Court issued opinions in a handful of cases that provide intriguing new insight into the issues the Court considers when reviewing and deciding whether to enforce arbitration agreements, particularly as they apply to consumer transactions. See Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 644 S.E.2d 705 (2007); Simpson v. World Fin. Corp. of S.C., 373 S.C. 178, 644 S.E.2d 723 (2007); Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 644 S.E.2d 663 (2007); Chassereau v. Global-Sun Pools, Inc., 373 S.C. 168, 644 S.E.2d 718 (2007). In these cases, the Court provides guidance for determining whether an arbitration agreement is unconscionable and narrows the applicability of arbitration provisions to claims for "outrageous torts that are unforeseeable to a reasonable consumer in the context of normal business dealings." Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 151, 644 S.E.2d 705, 709 (2007). In addition, attorneys drafting arbitration agreements subject to South Carolina law should also review these cases before drafting and having their clients utilize those provisions.

South Carolina's courts will approach some arbitration agreements with "considerable skepticism"

On March 16, 2007, the Supreme Court upheld a lower court ruling declaring an arbitration provision unconscionable and refusing to enforce it in an automobile trade-in contract between an automobile dealer and its customer. See Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 644 S.E.2d 663 (2007). In a unanimous decision, the Court determined that multiple provisions in the arbitration clause were unconscionable and outlined several facts that it considered in reaching the decision. As in many disputes over arbitration, the parties disagreed about which forum should determine if the arbitration provision was enforceable. Therefore, before reaching the unconscionability issues, the Court dispensed with this threshold question by finding there was no "clear and unmistakable" evidence that the parties intended for an arbitrator to determine its enforceability and asserted authority over that issue. Id. at 23, 644 S.E.2d at 668.

As explained by the Court, unconscionability is defined as "the absence of meaningful choice on the part of one party due to one-sided contract provisions, together with terms that are so oppressive that no reasonable person would make them and no fair and honest person would accept them." Id. at 24-25, 644 S.E.2d at 668 (citing Carolina Care Plan, Inc. v. United HealthCare Servs., Inc., 361 S.C. 544, 554, 606 S.E.2d 752, 757 (2004)). Relying on Fourth Circuit precedent, the Court stated that, "[i]n analyzing claims of unconscionability in the context of arbitration agreements, the Fourth Circuit has instructed courts to focus generally on whether the arbitration clause is geared towards achieving an unbiased decision by a neutral decision-maker." Id. at 25, 644 S.E.2d at 668-69 (citing Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999)). As a result, the Court outlined six non-exclusive factors it considered to determine if the parties' arbitration clause was "tainted by the absence of meaningful choice." Id. at 25, 644 S.E.2d at 669 (citing Carlson v. Gen. Motors Corp., 883 F.2d 287, 295 (4th Cir.1989)). Those factors are: "the nature of the injuries suffered by the plaintiff; whether the plaintiff is a substantial business concern; the relative disparity in the parties' bargaining power; the parties' relative sophistication; whether there is an element of surprise in the inclusion of the challenged clause; and the conspicuousness of the clause." Id. at 25, 644 S.E.2d at 669 (citing Carlson v. Gen. Motors Corp., 883 F.2d 287, 293 (4th Cir. 1989)).

In reaching its decision that Ms. Simpson did not have a meaningful choice in negotiating the parties' arbitration agreement, the Court relied on a series of Ohio cases that have addressed issues of unconscionability related to arbitration agreements in automobile dealer contracts. Id. at 26, 644 S.E.2d at 669. The Court agreed with the rationale of the Ohio courts, which included a determination that automobiles are a "necessity," and announced that it would approach an adhesion contract between a consumer and automobile dealer with "considerable skepticism." Id. at 26-27, 644 S.E.2d at 669-70. The Court then observed,

that the contract between Simpson and Addy involved a vehicle intended for use as Simpson's primary transportation, which is critically important in modern day society. Applying the factors considered by the Fourth Circuit in analyzing arbitration clauses, we also acknowledge Simpson's claim that she did not possess the business judgment necessary to make her aware of the implications of the arbitration agreement, and that she did not have a lawyer present to provide any assistance in the matter. Similarly, we note Simpson's allegation that the contract was "hastily" presented for her signature. Moreover, regardless of the general legal presumptions that a party to a contract has read and understood the contract's terms, we also find it necessary to consider the otherwise inconspicuous nature of the arbitration clause in light of its consequences.

Id. at 27, 644 S.E.2d at 670 (internal citation omitted).

As part of its arguments, the dealer asserted there was not an absence of meaningful choice in this transaction and compared it with the transaction between the parties in Carolina Care Plan, Inc. v. United HealthCare Services, Inc., 361 S.C. 544, 606 S.E.2d 752 (2004), where the Court enforced an arbitration provision. However, the Court rejected this argument and contrasted its findings in this case with those in the Carolina Care Plan decision because that matter involved two sophisticated parties negotiating at arms length in a commercial dispute. Id. at 28, 644 S.E.2d at 670.

After concluding that Ms. Simpson had no meaningful choice in negotiating the parties' arbitration agreement, the Court determined that the parties' arbitration clause contained three oppressive and one-sided terms. Id. at 28-33, 644 S.E.2d at 670-73. First, the Court found a limit on statutory remedies in the arbitration clause to be oppressive. Id. at 28-29, 644 S.E.2d at 670-71. In this case, Ms. Simpson had alleged causes of action under the South Carolina Unfair Trade Practices Act and the South Carolina Regulation of Manufacturers, Distributors, and Dealers Act, which provided treble and double damages, respectively. However, the arbitration clause specifically prohibited an arbitrator from awarding punitive, double or treble damages. Second, the Court expressed concern that the arbitration clause permitted the dealer to pursue judicial remedies without regard for the consumer's arbitration proceedings. Id. at 30-31, 644 S.E.2d at 671-72. Although the Court reaffirmed its previous holding that "lack of mutuality of remedy in an arbitration agreement, on its own, does not make the arbitration agreement unconscionable," it then rejected the explicit language in the clause prohibiting the dealer's judicial proceedings from being stayed pending the outcome of an arbitration. Id. at 31-32, 644 S.E.2d at 672. Based on that language, the Court envisioned a scenario where the dealer recovered a vehicle in a claim and delivery action and sold it before an arbitrator could determine the consumer's rights with regard to the same vehicle. Id. at 32, 644 S.E.2d at 672. Third, the Court also determined that the limitation on bringing warranty claims in a judicial forum was oppressive despite the fact that no such claim was asserted by Ms. Simpson. Id. at 32-33, 644 S.E.2d at 672-73. Nevertheless, the Court determined that it could address the issue and found the provision violated public policy and was unconscionable. Id. at 33, 644 S.E.2d at 673.

As a last ditch effort to preserve its right to arbitrate, the automobile dealer argued that the contract's severability clause requires the Court to sever the unconscionable provisions and enforce the remaining portions of the arbitration clause. However, the Court refused to rewrite the contract for the parties and found it was impossible to salvage the remaining portions of the arbitration clause as a result of the number and extent of unconscionable terms it contained. Id. at 34-35, 644 S.E.2d at 673-74.

Because the Simpson opinion was mostly fact-driven, the Court carefully notes that "there is no specific set of factual circumstances establishing the line which must be crossed when evaluating an arbitration clause for unconscionability . . . Instead, we emphasize the importance of a case-by-case analysis in order to address the unique circumstances inherent in the various types of consumer transactions." Id. at 36, 644 S.E.2d at 674.

Claims that are outrageous and not foreseeable not subject to arbitration

On April 23, 2007, the S.C. Supreme Court entered three decisions implicating the scope of arbitration provisions that purport to encompass all claims between the parties, including those claims that are outrageous and not foreseeable. See Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 644 S.E.2d 705 (2007); Simpson v. World Fin. Corp. of S.C., 373 S.C. 178, 644 S.E.2d 723 (2007); Chassereau v. Global-Sun Pools, Inc., 373 S.C. 168, 644 S.E.2d 718 (2007). Each of the complaints in these matters alleged claims of outrageous conduct arising out of or deriving from a contractual relationship between the parties. The Aiken and Simpson cases involved allegations against World Finance Corporation arising from misconduct by its employees. The plaintiffs alleged that those employees stole their personal financial information and used it to procure loans and embezzle the proceeds. Aiken, 373 S.C. at 146, 644 S.E.2d at 707. In Chassereau, the plaintiff alleged that employees of Global-Sun Pools made harassing telephone calls as part of their efforts to collect the amount due for the purchase of an above ground pool. 373 S.C. at 170, 644 S.E.2d at 719. Ms. Chassereau had stopped making payments for her pool because she claimed it malfunctioned and needed repairs that Global-Sun Pools refused to make. Id. at 170, 644 S.E.2d at 719.

In these cases the Court acknowledged that, "[b]oth state and federal policy favor arbitration of disputes and unless a court can say with positive assurance that the arbitration clause is not susceptible to any interpretation that covers the dispute, arbitration should generally be ordered." Aiken, 373 S.C. at 149, 644 S.E.2d at 708 (citing Zabinski v. Bright Acres Assocs., 346 S.C. 580, 596-97, 553 S.E.2d 110, 118-19 (2001)); see also Chassereau, 373 S.C. at 171, 644 S.E.2d at 720 (citing Zabinski v. Bright Acres Assocs., 346 S.C. 580, 596-97, 553 S.E.2d 110, 118-19 (2001)). However, the Court qualified this principle in the Chassereau decision, in which it stated, "[a]lthough we are constrained to resolve all doubts in favor of arbitration, this is not an absolute truism intended to replace careful judicial analysis." Chassereau, 373 S.C. at 172, 644 S.E.2d at 720.

Thus, the Court also explained that whether a party has agreed to submit a claim to arbitration is a matter of contract and that courts generally hold that "arbitration agreements apply to disputes in which a 'significant relationship' exists between the asserted claims and the contract in which the arbitration clause is contained." Aiken, 373 S.C. at 149, 644 S.E.2d at 708 (citing Zabinski, 346 S.C. at 598, 553 S.E.2d at 119). Applying this specific standard, the Court rejected arguments that a significant relationship existed between the consumers' tort claims and the parties' dealings pursuant to their loan agreements. Id. at 149, 644 S.E.2d at 708.

As a result, the Court pronounced the following new rule for determining whether a "significant relationship" exists between a dispute and the underlying contract that would require arbitration of those claims: "Because even the most broadly-worded arbitration agreements still have limits founded in general principles of contract law, this Court will refuse to interpret any arbitration agreement as applying to outrageous torts that are unforeseeable to a reasonable consumer in the context of normal business dealings." Id. at 151, 644 S.E.2d at 709. However, the Court explicitly stated that it is not addressing whether any arbitration agreement can be applied to claims for outrageous and unforeseen tortuous acts. Id. at 151, n.4, 644 S.E.2d at 709, n.4. The Court was also careful not to imply that its decisions establish a rule excluding all intentional conduct from the scope of an arbitration clause. Id. at 152, 644 S.E.2d at 709. The Court explained that, as a matter of public policy, it wants "to promote the procurement of arbitration in a commercially reasonable manner," and interpreting "an arbitration agreement to apply to actions completely outside the expectations of the parties would be inconsistent with this goal." Id. at 152, 644 S.E.2d at 710. Because the majority in each of these cases found the alleged activities were outrageous and not reasonably foreseeable when the parties entered into the contracts containing arbitration provisions, the Court held that those claims did not fall within the scope of the arbitration clause.

Justice Pleicones wrote dissenting opinions in Aiken and Chassereau. In both cases, he argued the Court reached a decision inconsistent with the policies requiring courts to resolve all doubts regarding arbitration issues in favor of arbitration. In Aiken, Justice Pleicones asserted that identify theft is foreseeable when a party discloses personal financial information as part of a transaction. 373 S.C. at 152-53, 644 S.E.2d at 710. Furthermore, in Chassereau, he argued that the parties did agree to arbitration claims arising from collection activities. 373 S.C. at 173, 644 S.E.2d at 721. "Under any conceivable definition of the word 'significant,' actions taken in seeking to collect a debt must be significantly related to the debt." Id. at 175, 644 S.E.2d at 722.

Application of Aiken and Chassereau by the Court of Appeals

Recently, the S.C. Court of Appeals relied on Aiken and Chassereau for its review of a circuit court's order denying a motion to compel arbitration. In Partain v. Upstate Auto. Group, Opinion No. 4373, 2008 WL 1848209 (S.C. Ct. App. Apr. 23, 2008), the S.C. Court of Appeals considered the applicability of an arbitration agreement, located in a vehicle sales agreement between Mr. Partain and Upstate Automotive Group, to Mr. Partain's Unfair and Deceptive Trade Practices Act claim against Upstate. Partain demonstrates how the S.C. Supreme Court's recent decisions will likely be interpreted by South Carolina's courts.

Mr. Partain claimed that the vehicle he purchased from Upstate was not the vehicle he negotiated with Upstate to purchase. Id. at *1. Based on the arbitration agreement in the vehicle sales agreement, Upstate filed a motion to compel arbitration.

Id. The circuit court denied the motion based on a "finding that the claim was not arbitrable since the claim was a tort independent of the contract and because the alleged tortious behavior was not reasonably foreseeable," and Upstate appealed. Id. After acknowledging that, as a general matter, public policy favors arbitration, the Court of Appeals explained that "[b]ecause even the most broadly worded arbitration agreements still have limits founded in general principles of contract law, [courts] will refuse to interpret any arbitration agreement as applying to outrageous torts that are unforeseeable to a reasonable consumer in the context of normal business dealings." Id. (citing Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 151, 644 S.E.2d 705, 709 (2007)). According to the Court of Appeals, it agreed that the arbitration clause at issue in Partain applied "only to disputes arising out of or relating to the underlying agreement." Id. at *2. Moreover, "to compel arbitration, a 'significant relationship' must exist between Partain's claim and the contract containing the arbitration agreement." Id. (citing Vestry and Church Wardens of Church of Holy Cross v. Orkin Exterminating Co., 356 S.C. 202, 209, 588 S.E.2d 136, 140 (Ct. App. 2003)).

Hence, the Court of Appeals, in applying the S.C. Supreme Court's rationale, identified the underlying agreement in this case to be the vehicle sales agreement between Mr. Partain and Upstate. The Court of Appeals then concluded that there was a significant relationship between Mr. Partain's Unfair and Deceptive Trade Practices claim and this agreement. Id. The Partain court went on to address the issue of whether this case involved "outrageous acts" that were "unforeseeable to a reasonable consumer in the context of normal business dealings." Id. (citing Chassereau v. Global Sun Pools, Inc., 373 S.C. 168, 172, 644 S.E.2d 718, 720 (2007)). After noting that the S.C. Supreme Court, in Aiken and Chassereau, had recently refused to apply arbitration agreements where such circumstances were present, the Court of Appeals noted that the "conduct alleged [in the present case] does not meet the standard established in Chassereau and Aiken."

Id. at *2-*3. The court thus concluded that, "when the underlying tort claim is significantly related to the contract and the arbitration agreement is not violative of public policy, statutory law or the Constitution, this court will compel arbitration consistent with the strong presumption in its favor under our state's policy." Id. at *3.

Conclusion

During the 20th century, South Carolina experienced a shift in public policy from a negative view of arbitration to one that favors the enforceability of arbitration agreements. Indeed, in their most recent decisions discussed above, the Supreme Court and Court of Appeals acknowledge and reaffirm the applicability of important arbitration precedent. Consistent with the requirements of the FAA and SCUAA, the S.C. Supreme Court's most recent decisions do not diminish arbitration as an acceptable method for dispute resolution or place arbitration provisions on unequal footing with other contract provisions. However, the S.C. Supreme Court has identified specific circumstances where it will resist the strong presumptions in favor of arbitration and refuse to enforce some arbitration clauses.

Thad H. Westbrook is a partner and A. Mattison Bogan is an associate in the Columbia office of Nelson Mullins Riley & Scarborough, LLP.