Carlson v. S.C. State Plastering, LLC

• Decision Date: 12 June 2013
• Docket Number: Nos. 5143.,s. 5143.
• Citation: 404 S.C. 250,743 S.E.2d 868
• Court: South Carolina Court of Appeals
• Parties: Roger F. CARLSON and Mary Jo Carlson, Respondents, v. SOUTH CAROLINA STATE PLASTERING, LLC, Peter Conley, Individually, Del Webb Communities, Inc., and Pulte Homes, Inc., Defendants, Of whom Del Webb Communities, Inc. and Pulte Homes, Inc. are the Appellants. Appellate Case No. 2011–202907.

404 S.C. 250

743 S.E.2d 868

Roger F. CARLSON and Mary Jo Carlson, Respondents,

v. SOUTH CAROLINA STATE PLASTERING, LLC, Peter Conley, Individually, Del Webb Communities, Inc., and Pulte Homes, Inc., Defendants,Of whom Del Webb Communities, Inc. and Pulte Homes, Inc. are the Appellants.Appellate Case No. 2011–202907.

Nos. 5143.

Court of Appeals of South Carolina.

Heard April 3, 2013.

Decided June 12, 2013.

Robert L. Widener, of Columbia, and A. Victor Rawl, Jr., of Charleston, both of McNair Law Firm, PA, for Appellants.

W. Jefferson Leath, Jr. and Michael S. Seekings, both of Leath, Bouch & Seekings, LLP, of Charleston; John T. Chakeris, of The Chakeris Law Firm, of Charleston; and Phillip W. Segui, Jr., of Segui Law Firm, LLC, of Mount Pleasant, for Respondents.

WILLIAMS, J.

Del Webb Communities, Inc. (Del Webb) and Pulte Homes, Inc. ¹ (Pulte) appeal the circuit court's order denying their motion to compel arbitration based on its finding that they waived any right to arbitration. We reverse.

FACTS

On March 8, 2002, Roger F. Carlson and Mary Jo Carlson entered into a purchase agreement with Del Webb whereby they agreed to purchase a home in the Sun City development in Hilton Head, South Carolina. The purchase agreement contained the following arbitration clause:

Any controversy or claim arising out of or relating to this Agreement or Your purchase of the Property shall be finally settled by arbitration administered by the American Arbitration Association in accordance with its Arbitration Rules for the Real Estate Industry and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

... After Closing, every controversy or claim arising out of or relating to this Agreement, or the breach thereof shall be settled by binding arbitration as provided by the South Carolina Uniform Arbitration Act.

The deed to the home, which a representative for Del Webb executed on March 15, 2002, did not include an arbitration clause.

In September 2008, the Carlsons commenced the instant action against Del Webb and Pulte, alleging construction defects in their home's stucco siding. The Carlsons' case is one of about 140 cases currently pending against Del Webb and Pulte involving stucco-clad homes in the Sun City development. Del Webb and Pulte answered in December 2008 and asserted various defenses, including: (1) the alleged failure of the Carlsons to comply with sections 40–59–810 to –860 of the South Carolina Code (2011) (Right to Cure Act ² or the Act), and (2) that the Carlsons' claim was subject to mandatory arbitration.

In February 2009, the Carlsons sent Del Webb and Pulte a letter purportedly providing notice as required by the Right to Cure Act along with a proposed consent order staying the action to allow for compliance with the Act. Del Webb and Pulte responded with a letter requesting clarification of the defects as allowed by the Act. Del Webb and Pulte allege the Carlsons did not respond to the request.

In May 2009, the circuit court entered a consent order finding that the Carlsons filed the instant action without first complying with the requirements of the Right to Cure Act and staying the case until the Carlsons complied with the Act. The stay expired ninety days after it was entered. Del Webb and Pulte allege that, at a status conference in April 2010 addressing all 140 cases, they advised the circuit court that the two threshold issues to decide in the cases were the Right to Cure Act and arbitration. Also in April 2010, the Carlsons moved to amend their complaint to add class action allegations pursuant to Rule 23(a), SCRCP. Del Webb and Pulte opposed the motion, and the circuit court granted the motion on December 10, 2010. The Carlsons filed their amended complaint on December 29, 2010.

On May 24, 2010, Del Webb and Pulte filed a motion to dismiss based on noncompliance with the Right to Cure Act in a related case, Amadeo v. South Carolina State Plastering, LLC, Peter Conley, Individually, Del Webb, & Pulte, No. 09–CP–2904 (hereinafter, Amadeo case). The case was one of the 140 cases brought against Del Webb and Pulte alleging defective stucco on homes in the Sun City development. In the alternative, Del Webb and Pulte moved to stay the case and compel compliance with the Act.

In a status conference on July 13, 2010, the circuit court imposed a seventy-day briefing schedule to brief the Right to Cure Act issue. Del Webb and Pulte assert they again informed the court during this status conference that the two threshold issues to address were the Right to Cure Act and arbitration, and the circuit court indicated its intent to address the Right to Cure Act issue first.

In an order filed January 11, 2011, the circuit court denied Del Webb and Pulte's motion to dismiss in the Amadeo case. The circuit court noted that because it had not yet certified the class, the order technically only applied to the Amadeo case, but that “all parties are aware that there are multiple pending similarly situated civil claims.”

Del Webb and Pulte moved to compel arbitration in the current action on February 14, 2011. In an order filed October 20, 2011, the circuit court denied the motion, finding that Del Webb and Pulte had waived the right to compel arbitration based on their delay in bringing the motion. This appeal followed.

LAW/ANALYSISI. Standard of Review

“In reviewing a circuit court's decision regarding a motion to stay an action pending arbitration, the determination of whether a party waived its right to arbitrate is a legal conclusion subject to de novo review....” MailSource, LLC v. M.A. Bailey & Assocs., 356 S.C. 370, 374, 588 S.E.2d 639, 641 (Ct.App.2003) (internal quotation marks omitted).

II. Waiver

Del Webb and Pulte argue the circuit court erred in finding they waived their right to enforce the arbitration clause in the purchase contract by engaging in litigation for over two years before filing a motion to compel arbitration. Specifically, Del Webb and Pulte argue (1) the Carlsons did not suffer any prejudice as the result of the delay; (2) Del Webb and Pulte did not engage in any discovery before filing the motion; and (3) Del Webb and Pulte did not file the motion sooner because they were waiting on the resolution of the Right to Cure Act issue. We agree.

“The right to enforce an arbitration clause may be waived.” Davis v. KB Home of S.C., Inc., 394 S.C. 116, 131, 713 S.E.2d 799, 807 (Ct.App.2011). “In order to establish waiver, a party must show prejudice through an undue burden caused by delay in demanding arbitration.” Liberty Builders, Inc. v. Horton, 336 S.C. 658, 665, 521 S.E.2d 749, 753 (Ct.App.1999). “There is no set rule as to what constitutes a waiver of the right to arbitrate; the question depends on the facts of each case.” Id. (internal quotation marks omitted).

This court has previously recognized three factors to consider when determining whether a party has waived its right to compel arbitration:

(1) whether a substantial length of time transpired between the commencement of the action and the commencement of the motion to compel arbitration; (2) whether the party requesting arbitration engaged in extensive discovery before moving to compel arbitration; and (3) whether the non-moving party was prejudiced by the delay in seeking arbitration.

Davis, 394 S.C. at 131, 713 S.E.2d at 807 (internal quotation marks omitted). “To establish prejudice, the non-moving party must show something more than mere inconvenience.” Id. (internal quotation marks omitted). In addition to the above factors, this court has also considered the extent to which the parties have availed themselves of the circuit court's assistance. See id. at 133, 713 S.E.2d at 808.

Based on the above factors, we find the circuit court erred in denying Del Webb and Pulte's motion to compel arbitration. First, we acknowledge that a relatively substantial length of time transpired in the instant case between the commencement of the action and the commencement of the motion to compel arbitration. Specifically, the Carlsons commenced the instant action in September 2008, and Del Webb and Pulte did not file their motion to compel until February 2011, over two years after the filing of the complaint. Nevertheless, Del Webb and Pulte had raised the issue of arbitration since the inception of the action. The history of activity in the instant case indicates that the delay in filing the motion to compel was the result of the circuit court's decision to address the Right to Cure Act issue first and not because of any dilatory actions or tactics by Del Webb and Pulte.

Second, no discovery has occurred in the instant case. In its order, the circuit court relied in part on a list of more than forty actions undertaken by Del Webb and Pulte in support of its ruling denying the motion to compel arbitration. However, the majority of the actions on the list were taken in other cases against Del Webb and Pulte. Although we recognize that similar cases are currently pending against Del Webb and Pulte, we find it would be inappropriate to consider actions undertaken in other cases for purposes of determining the extent of discovery that has been undertaken in the instant case. Accordingly, we find the lack of discovery conducted by Del Webb and Pulte weighs in favor of granting the motion to compel arbitration. See Gen. Equip. & Supply Co. v. Keller Rigging & Constr., SC, Inc., 344 S.C. 553, 557, 544 S.E.2d 643, 645 (Ct.App.2001) (finding an eight-month period in which the “litigation consisted of routine administrative matters and limited discovery [that] did not involve the taking of depositions or extensive interrogatories” did not establish waiver).

Finally, due to the relatively limited amount of activity occurring in the instant case, the Carlsons will not be prejudiced by Del Webb and Pulte's delay in filing their motion to compel arbitration. Further, the record reveals the Carlsons...