Davis v. Isco Indus., Inc.
| Decision Date | 04 August 2021 |
| Docket Number | Appellate Case No. 2018-000857,Opinion No. 5840 |
| Citation | 434 S.C. 488,864 S.E.2d 391 |
| Parties | Daniel Lee DAVIS, individually and on behalf of all those similarly situated, Respondent, v. ISCO INDUSTRIES, INC., Appellant. |
| Court | South Carolina Court of Appeals |
Jeffrey Andrew Lehrer, of Ford & Harrison, LLP, of Spartanburg, for Appellant.
John S. Simmons, of Simmons Law Firm, LLC, of Columbia; John Belton White, Jr., Ryan Frederick McCarty, and Marghretta Hagood Shisko, all of Harrison White P.C., of Spartanburg, for Respondent.
ISCO Industries, Inc. appeals the circuit court's denial of its motion to compel arbitration in a suit its former employee, Daniel Lee Davis, brought against it following a data breach. ISCO contends the circuit court erred in determining an arbitration agreement did not apply due to the unforeseeable and outrageous tort exception and because Davis's negligence claim did not arise out of or relate to his employment relationship with ISCO. We affirm.
ISCO is a Kentucky based corporation, which provides global customized piping solutions. It has locations and employees in over thirty-five states. Davis worked for ISCO as a mechanic and fusion technician in South Carolina from March 2007 until March 2015. At the start of his employment, ISCO required Davis to provide personal identifying information including his Social Security number. He also signed an arbitration agreement. In the arbitration agreement, he agreed to exclusively settle by arbitration "any and all claims, disputes or controversies arising out of or relating to my candidacy for employment, employment and/or cessation of employment with ISCO."
On March 2, 2016, an employee in ISCO's human resources department received an e-mail requesting employees’ "2015 IRS Form W-2 data" purportedly from a senior executive at ISCO. The employee gathered and e-mailed the requested data. The information included the Social Security numbers, addresses, and compensation and tax withholding information of current and former ISCO employees. Shortly thereafter, an employee at ISCO realized the e-mail was actually from an outside third party who had fraudulently disguised his e-mail address. On March 4, 2016, ISCO notified the affected employees of the data breach. ISCO provided these employees with free identity theft protection services through LifeLock, which it later renewed. The data breach affected 449 current and former employees throughout thirty-five states.
Davis filed an action against ISCO on September 13, 2017, alleging claims for breach of implied contract and negligence. Davis filed the action on behalf of all current and former ISCO employees whose personal identifying information was released as a result of the data breach. He alleged ISCO had a duty to exercise reasonable care in holding, securing, and protecting that personal identifying information; it was foreseeable Davis and the others would suffer substantial harm if ISCO employed inadequate safety practices for securing personal identifying information; and as a result of ISCO's negligence, Davis and others suffered and will continue to suffer damages and injury, including out-of-pocket expenses and the loss of productivity and enjoyment as a result of spending time monitoring and correcting consequences of the data breach.
ISCO filed a motion to dismiss and compel arbitration. Davis filed an amended complaint removing his cause of action for breach of contract. ISCO filed a motion to dismiss Davis's complaint in the event the court did not compel arbitration, asserting Davis lacked standing and failed to state facts sufficient to establish a negligence claim or to support an award of punitive damages or attorney's fees. Davis filed a response in opposition to ISCO's motions.
The circuit court held a hearing on both of ISCO's motions on February 23, 2018. The court determined the arbitration agreement was not applicable to Davis's cause of action.1 The court found:
The arbitration agreement that [Davis] signed applied to claims "arising out of or relating to my candidacy for employment, employment and/or cessation of employment with ISCO," but [Davis's] claims in this case arise out of [ISCO's] release of the personal identifying information of [Davis] and others to cyber-criminals. The [c]ourt finds that there is no relationship between the subject matter of [Davis's] claims in this case and the arbitration agreement, which relates to employment. Like the [c]ourt in Aiken ,[2 ] this [c]ourt holds that [Davis's] claims in this case are "for unanticipated and unforeseeable tortious conduct" and are, therefore, not within the scope of the arbitration agreement.
(citation omitted).
This appeal followed.
Unless the parties otherwise provide, "[t]he question of the arbitrability of a claim is an issue for judicial determination." Zabinski v. Bright Acres Assocs. , 346 S.C. 580, 596, 553 S.E.2d 110, 118 (2001). Determinations of arbitrability are subject to de novo review, but if any evidence reasonably supports the circuit court's factual findings, this court will not overrule those findings. Stokes v. Metro. Life Ins. Co. , 351 S.C. 606, 609-10, 571 S.E.2d 711, 713 (Ct. App. 2002).
ISCO asserts the circuit court erred by denying its motion to compel arbitration by ruling Davis's negligence claim did not arise out of or relate to his employment relationship with ISCO. It argues there was a significant relationship between Davis's employment relationship and the conduct in this case. We disagree.
[S]tate law determines questions "concerning the validity, revocability, or enforceability of contracts generally," Perry v. Thomas , 482 U.S. 483, 493 n.9 [107 S.Ct. 2520, 96 L.Ed.2d 426] (1987), but the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards "create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24 [103 S.Ct. 927, 74 L.Ed.2d 765] (1983) ].
Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH , 206 F.3d 411, 417 n.4 (4th Cir. 2000) (citations omitted). "These statutes constitute ‘a congressional declaration of liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.’ " Id. (quoting Moses H. Cone Mem'l Hosp. , 460 U.S. at 24, 103 S.Ct. 927 ).
"We must address questions of arbitrability with a healthy regard for the federal policy favoring arbitration." Towles v. United HealthCare Corp. , 338 S.C. 29, 41, 524 S.E.2d 839, 846 (Ct. App. 1999). "Therefore, ‘any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration’," including " ‘the construction of the contract language itself.’ " Id. (quoting O'Neil v. Hilton Head Hosp. , 115 F.3d 272, 273-74 (4th Cir. 1997) ). "Motions to compel arbitration should not be denied unless the arbitration clause is not susceptible of any interpretation that would cover the asserted dispute." Id. at 41-42, 524 S.E.2d at 846. However, our supreme court recently noted that
Palmetto Constr. Grp., LLC v. Restoration Specialists, LLC , 432 S.C. 633, 639, 856 S.E.2d 150, 153 (2021), reh'g denied , S.C. Sup. Ct. Order dated Apr. 20, 2021.
"Generally, ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ " Int'l Paper Co. , 206 F.3d at 416 (quoting United Steelworkers of Am. v. Warrior & Gulf Nav. Co. , 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) ). "Arbitration is available only when the parties involved contractually agree to arbitrate." Berry v. Spang , 433 S.C. 1, 11-12, 855 S.E.2d 309, 315 (Ct. App. 2021) (quoting Towles , 338 S.C. at 37, 524 S.E.2d at 843-44 ), reh'g denied , S.C. Ct. App. Order dated Mar. 26, 2021, petition for cert. filed. "Arbitration rests on the agreement of the parties, and the range of issues that can be arbitrated is restricted by the terms of the agreement." Zabinski v. Bright Acres Assocs. , 346 S.C. 580, 596-97, 553 S.E.2d 110, 118 (2001). "Determining whether a party agreed to arbitrate a particular dispute is an issue for judicial determination to be decided as a matter of contract." Towles , 338 S.C. at 41, 524 S.E.2d at 846. "An arbitration clause is a contractual term, and general rules of contract interpretation must be applied to determine a clause's applicability to a particular dispute." Id. "The construction of a clear and unambiguous contract is a question of law for the court to determine." Williams v. Gov't Emps. Ins. Co. (GEICO) , 409 S.C. 586, 594, 762 S.E.2d 705, 710 (2014) (emphasis omitted). "The cardinal rule of contract interpretation is to ascertain and give effect to the intention of the parties and, in determining that intention, the court looks to the language of the contract." First S. Bank v. Rosenberg , 418 S.C. 170, 180, 790 S.E.2d 919, 925 (Ct. App. 2016) (quoting Watson v. Underwood , 407 S.C. 443, 454-55, 756 S.E.2d 155, 161 (Ct. App. 2014) ).
"When a party invokes an arbitration clause after the contractual relationship between the parties has ended, the parties’ intent governs whether the clause's authority extends beyond the termination of the contract." Towles , 338 S.C. at 41, 524 S.E.2d at 846. "A broadly-worded arbitration clause applies to disputes...
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