644 S.E.2d 663 (S.C. 2007), 26293, Simpson v. MSA of Myrtle Beach, Inc.

Docket Nº:26293.
Citation:644 S.E.2d 663, 373 S.C. 14
Opinion Judge:Chief Justice TOAL:
Party Name:Sherry H. SIMPSON, Respondent, v. MSA OF MYRTLE BEACH, INC. d/b/a Addy's Harbor Dodge, Daimler Chrysler Services NA, LLC, and CrossCheck, Inc., Defendants, of whom MSA of Myrtle Beach, Inc. d/b/a Addy's Harbor Dodge, is the Appellant.
Attorney:Joseph Gregory Studemeyer, of Columbia, for Appellant., Lawrence Sidney Connor, IV, of Kelaher, Connell & Connor, of Surfside Beach, for Respondent.
Case Date:March 26, 2007
Court:Supreme Court of South Carolina
 
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Page 663

644 S.E.2d 663 (S.C. 2007)

373 S.C. 14

Sherry H. SIMPSON, Respondent,

v.

MSA OF MYRTLE BEACH, INC. d/b/a Addy's Harbor Dodge, Daimler Chrysler Services NA, LLC, and CrossCheck, Inc., Defendants,

of whom MSA of Myrtle Beach, Inc. d/b/a Addy's Harbor Dodge, is the Appellant.

No. 26293.

Supreme Court of South Carolina.

March 26, 2007

          Heard Nov. 1, 2006.

          Rehearing Denied May 23, 2007.

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[Copyrighted Material Omitted]

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          Joseph Gregory Studemeyer , of Columbia, for Appellant.

          Lawrence Sidney Connor, IV , of Kelaher, Connell & Connor, of Surfside Beach, for Respondent.

          Chief Justice TOAL :

          [373 S.C. 19] This case arises out of an arbitration clause in an automobile trade-in contract between an automobile dealership and a customer. The automobile dealership filed a motion for protective order and/or to stay and to compel arbitration in response to the customer's civil action. The trial court denied the dealership's motion on the grounds

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that the arbitration clause was unconscionable. This appeal followed.

          FACTUAL/PROCEDURAL BACKGROUND

          Appellant MSA of Myrtle Beach, Inc d/b/a Addy's Harbor Dodge (“Addy" ), a car dealership, and Respondent Sherry H. Simpson (“Simpson" ) entered into a contract whereby Simpson traded in her 2001 Toyota 4Runner for a new 2004 Dodge Caravan. Directly above the signature line on the first page of the contract, the signee was instructed in bold to “SEE ADDITIONAL TERMS AND CONDITIONS ON OPPOSITE PAGE." The additional terms and conditions contained an arbitration clause stating the following:

          10. ARBITRATION Any and all disputes, claims or controversies between Dealer and Customer or between any [373 S.C. 20] officers, directors, agents, employees, or assignees of Dealer and Customer arising out of or relating to: (a) automobile warranty, workmanship, or repair; (b) the terms or enforceability of the sale, lease, or financing of any vehicle; (c) any claim of breach of contract, misrepresentation, conversion, fraud, or unfair and deceptive trade practices against Dealer or any officers, directors, agents, employees, or assignees of Dealer; (d) any and all claims under any consumer protection statute; and (e) the validity and scope of this contract, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The parties expressly waive all rights to trial by jury on such claims. Provided, however, that nothing in this contract shall require Dealer to submit to arbitration any claims by Dealer against customer for claim and delivery, repossession, injunctive relief, or monies owed by customer in connection with the purchase or lease of any vehicle and any claims by Dealer for these remedies shall not be stayed pending the outcome of arbitration. The filing fees for arbitration shall be paid by the party initiating arbitration. The arbitrator may allocate the other arbitration fees as he/she deems appropriate. In addition to any discovery permitted by the Commercial Arbitration rules, any party may take one disposition [sic] of an opposing party. The parties agree to exchange all exhibits to be used in arbitration 7 days before arbitration. The arbitrator shall determine the controversy in accordance with the terms of this contract between the parties and shall not consider any parole evidence which purports to alter, modify, vary, add to, or contradict such contract. The arbitrator shall give effect to all applicable statutes of limitation. Any arbitration under this agreement shall take place in Horry County, South Carolina and Customer agrees that the courts of Horry County, South Carolina shall have exclusive jurisdiction over enforcement of this contract and any award made by any arbitrator pursuant to this contract. In no event shall the arbitrator be authorized to award punitive, exemplary, double, or treble damages (or any other damages which are punitive in nature or effect) against either party. Unless otherwise agreed in writing, no claims [373 S.C. 21] against Dealer shall be consolidated with other claims in the nature of a class action.

          Six months later, Simpson filed a complaint in the Horry County court of common pleas alleging Addy violated the South Carolina Unfair Trade Practices Act and the South Carolina Manufacturers, Distributors, and Dealers Act by misrepresenting the trade-in value of the vehicle, artificially increasing the purchase price, and failing to provide all rebates promised. Simpson sought damages consistent with the maximum statutory remedies permitted for violations of these statutes.

          Addy's answer denied Simpson's allegations and asserted that the contract between the parties contained an arbitration clause such that the matter should be stayed and that Simpson's only remedy was to file for arbitration. Addy contemporaneously filed a motion for protective order and/or to stay and compel arbitration. Thereafter, Simpson filed a memorandum in opposition to Addy's motion alleging that the arbitration clause was unconscionable and unenforceable.

          At the motion hearing, the trial court ordered the parties to attempt mediation. After the parties notified the trial court that mediation failed, the trial court issued an order denying Addy's motion on the grounds

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that the arbitration clause was unconscionable. Addy filed this appeal.

          The case was certified to this Court from the court of appeals pursuant to Rule 204(b), SCACR , and Addy raises the following issues for review:

          I. Did the lower court err in ruling that the arbitration clause was unenforceable without first submitting the issue of enforceability to arbitration?

          II. Did the lower court err in denying Addy's motion to stay the civil litigation pending arbitration?

          III. Did the lower court err in failing to provide Addy a reasonable opportunity to present evidence as to the commercial setting, purpose, and effect of the arbitration clause in order to aid the court in making a determination on unconscionability?

          [373 S.C. 22] STANDARD OF REVIEW

          Arbitrability determinations are subject to de novo review. Wellman, Inc. v. Square D Co., 366 S.C. 61, 67, 620 S.E.2d 86, 89 (Ct.App.2005) . Nevertheless, a circuit court's factual findings will not be reversed on appeal if any evidence reasonably supports the findings. Thornton v. Trident Med. Ctr., L.L.C., 357 S.C. 91, 94, 592 S.E.2d 50, 51 (Ct.App.2003) .

          LAW/ANALYSIS

          I. The appropriate forum for determining the validity of the arbitration clause.

          As a preliminary matter, Addy contends that the trial court erred in ruling on the arbitration clause's enforceability rather than first submitting that issue of enforceability to arbitration. We disagree.

          The South Carolina Uniform Arbitration Act (UAA) generally provides that where one party denies the existence of an arbitration agreement raised by an opposing party, a court must immediately determine whether the agreement exists in the first place. S.C.Code Ann. § 15-48-20(a)(2005) . If no agreement is found to exist, the court must deny any application to arbitrate.1 Id.

          [373 S.C. 23] Our precedents in this area echo the UAA's policy that the trial court should determine the threshold validity of the arbitration agreement. See Zabinski, 346 S.C. at 596, 553 S.E.2d at 118 (“The question of the arbitrability of a claim is an issue for judicial determination, unless the parties provide otherwise." ); Hous. Auth. of the City of Columbia v. Cornerstone Hous., LLC, 356 S.C. 328, 334, 588 S.E.2d 617, 620 (Ct.App.2003) ( “The initial inquiry to be made by the trial court is whether an arbitration agreement exists between the parties." ). Such rulings are based on the contractual nature of arbitration agreements. See Towles v. United Healthcare Corp., 338 S.C. 29, 37, 524 S.E.2d 839, 843-44 (Ct.App.1999) ( “Arbitration is available only when the parties involved contractually agreed to arbitrate." ).

          This proposition finds support in other jurisprudence. The United States Supreme Court has noted that, in limited circumstances, a court should assume that the parties

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intended the court to decide certain arbitration issues in the absence of “clear and unmistakable" evidence to the contrary. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (quoting AT & T Techs., Inc. v. Commc'ns Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ). These limited circumstances typically involve certain “gateway matters," such as whether the parties have a valid arbitration agreement at all, or whether an arbitration clause applies to a certain type of controversy. Id. Thus, the prevailing authority supports the notion that courts may have at least a limited role where an arbitration clause otherwise applies.

          In this case, the trial court was the proper forum for determining the enforceability of the arbitration clause in the contract between Simpson and Addy. Although the clause specifically stated that arbitration applied to issues involving “the validity and scope of this contract," Simpson challenged the validity of the arbitration provision on grounds of unconscionability, bringing into question whether an arbitration agreement even existed in the first place. Under the UAA, [373 S.C. 24] the question of this clause's validity was for the court to decide. See S.C.Code Ann. § 15-48-20(a) (2005) .

          Furthermore, because Simpson has challenged the validity of the entire arbitration...

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