Palmetto Wildlife Extractors, LLC v. Justin Ludy & First Cmty. Bank Corp., Appellate Case No. 2018-001536

CourtCourt of Appeals of South Carolina
Writing for the CourtKONDUROS, J.
Citation435 S.C. 690,869 S.E.2d 859
Parties PALMETTO WILDLIFE EXTRACTORS, LLC and Patrick Charping, Respondents, v. Justin LUDY and First Community Bank Corporation d/b/a First Community Bank, Defendants, of whom Justin Ludy is the Appellant.
Docket NumberAppellate Case No. 2018-001536,Opinion No. 5886
Decision Date05 January 2022

435 S.C. 690
869 S.E.2d 859

PALMETTO WILDLIFE EXTRACTORS, LLC and Patrick Charping, Respondents,
Justin LUDY and First Community Bank Corporation d/b/a First Community Bank, Defendants,

of whom Justin Ludy is the Appellant.

Appellate Case No. 2018-001536
Opinion No. 5886

Court of Appeals of South Carolina.

Heard May 4, 2021
Filed January 5, 2022
Rehearing Denied February 25, 2022

Wesley D. Few, of Wesley D. Few, LLC, of Greenville, for Appellant.

Margaret Nicole Fox and James Mixon Griffin, both of Griffin - Davis, of Columbia, for Respondents.


435 S.C. 693

In this dispute between members of a limited-liability company, Justin Ludy appeals the circuit court's denial of his motion to compel arbitration of certain claims. Ludy argues

435 S.C. 694

the parties' Operating Agreement provided "any dispute" about arbitrability would be decided in arbitration. We affirm in part, reverse in part, and remand.


On April 6, 2012, Ludy formed Palmetto Wildlife Extractors, LLC (the LLC). Patrick Charping became a member of the LLC in 2014 in exchange for a capital contribution of $49,000. On October 13, 2014, Charping and Ludy executed an amended Operating Agreement (the Agreement) for the LLC. The Agreement stated each member owned a 50% financial interest, which the Agreement defined as "a Member's rights to share in profits and losses, a Member's rights to receive distributions[,] and a Member's Capital Interest." Ludy maintained a 51% "Governance Interest," which was defined as "all a Member's rights as a Member in the Company, other than financial rights." Additionally, the Agreement provided:

12.14. Arbitration. Any controversy or claim arising out of or related to this Agreement or the breach thereof, shall be settled, except as may otherwise be provided herein, by binding arbitration in accordance with [ sections 15-48-10 to -240 of the South Carolina Code ] and the arbitration award may be entered as a final judgment in any court having jurisdiction thereon. Any dispute as to whether a controversy or claim is subject to arbitration shall be submitted as part of the arbitration proceeding.

The Agreement also stated:

The LLC shall be dissolved only upon the occurrence of one of the following "Dissolution Events":

11.1.1. The affirmative vote of all of the Members owning a Governance Interest;

11.1.2. Any event occurs that makes it unlawful for all or substantially all of the business of the LLC to be continued, but any cure of illegality within ninety (90) days after notice to the LLC of the event is effective retroactively to the date of the event for purposes of this section;

11.1.3. On application by a Member or a dissociated Member, upon entry of a judicial decree as provided by Section 33-44-801(5) of the Act;[1 ] or
435 S.C. 695
11.1.4. The filing by the Secretary of State of a certificate administratively dissolving the LLC pursuant to Section 33-44-810 of the Act.

Disagreements arose between Ludy and Charping over various financial matters. As a result, Charping and Ludy amended the Agreement in October 2015 to set their salaries and to prohibit Ludy from withdrawing money for personal use unless Charping agreed to the withdrawal. However, according to Charping, he and Ludy continued to have similar issues as before.

On April 25, 2017, Ludy filed a complaint (the Lexington Suit) against Charping in the Lexington County Court of Common Pleas, seeking various remedies stemming from the Act, including the judicial expulsion and dissociation of Charping from the LLC.

Charping and the LLC (collectively, Respondents) filed a complaint against Ludy

869 S.E.2d 862

and First Community Bank Corporation (the Bank) in the Richland County Court of Common Pleas on May 10, 2017. That complaint alleged causes of action including breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, civil conspiracy, and defamation. Additionally, Respondents sought the appointment of a receiver pursuant to section 33-44-803(a), an accounting, and judicial dissolution of the LLC pursuant to section 33-44-801 on one or more of the following grounds:

a. another member has engaged in conduct relating to the company's business that makes it not reasonably practicable to carry on the company's business with that member;

b. it is not otherwise reasonably practicable to carry on the company's business in conformity with the articles of organization and the operating agreement; and

c. the member in control of the company has acted, is acting, or will continue to act in a manner that is unlawful, oppressive, fraudulent, or unfairly prejudicial to Plaintiff Charping.

Respondents' complaint alleged Ludy had taken over $126,000 more than Charping had taken from the LLC's financial accounts since 2015. They asserted Ludy used the

435 S.C. 696

LLC's bank accounts as his own personal accounts—writing checks and withdrawing funds to pay for expenses unrelated to the business. They contended that even after the Agreement was amended, Ludy continued using the business account for personal use, withdrawing approximately $19,347.39 for personal expenses in 2016 and $3,729.76 in personal expenses during the first quarter of 2017. Respondents asserted Ludy withdrew $57,944.92 for tax payments in 2016, whereas Charping only withdrew $24,197.62—a difference of $33,747.30. They alleged that when Charping would withdraw funds to reduce "the imbalance in the capital accounts, Ludy would become very agitated, upset[,] and confrontational." They asserted Ludy began restricting Charping's access to monitor the expenses incurred by the LLC. Charping stated in an affidavit that on March 31, 2017, Ludy limited Charping's access to financial information and customer data within the LLC's financial software, which prevented him from writing estimates while working and updating financial information on large projects.

Additionally, Respondents asserted that in April 2017, Charping withdrew $32,000 for taxes after verifying the amount with the LLC's tax accountant. Thereafter, Respondents contended "Ludy snapped, accused Charping of theft, and blocked Charping's access to [the LLC's] accounting software and social media sites. They also alleged Ludy and the Bank removed Charping from the LLC's bank account, preventing him from accessing any funds or viewing any account information. Further, they contended Ludy failed to make loan payments the LLC owed that Charping had personally guaranteed, which harmed Charping's credit and exposed him to personal liability. Charping asserted in his affidavit that Ludy's failure to make some of these payments also negatively impacted the credit history of the LLC.

Following the filing of Respondents' complaint in Richland County, Ludy dismissed the Lexington Suit pursuant to Rule 41(a), SCRCP. On June 6, 2017, Ludy filed a motion to dismiss or stay and compel arbitration. The motion stated Ludy sought "an order dismissing this case and compelling arbitration" and "dismissing or staying this action and compelling arbitration of this dispute." On June 29, 2017, Charping moved the court pursuant to

435 S.C. 697

section 15-65-10 of the South Carolina Code2 for an order appointing a receiver for the LLC. On July 14, 2017, Ludy filed an answer and counterclaim against Charping, reasserting the claims originally raised in the Lexington Suit along with others. Ludy counterclaimed for (1) breach of fiduciary duty; (2) breach of contract; (3) breach of contract accompanied by a fraudulent act; (4) the imposition of a constructive trust; (5) breach of the duty of loyalty; (6) breach of the duty of good faith and fair dealing; (7) injunctive relief under Rule 65, SCRCP ; and (8) judicial expulsion

869 S.E.2d 863

and dissociation. The pleading stated Ludy was filing it "out of an abundance of caution in view of and subject to the pending motion to dismiss and compel arbitration." On July 28, 2017, Respondents moved for the case to be assigned to the business court program. On December 27, 2017, Charping filed a response in opposition to Ludy's motion to compel arbitration. Charping argued the plain language of the arbitration clause illustrated it was not applicable to the statutory claims for judicial dissolution, appointment of a receiver, and an accounting. He also asserted Ludy had waived his right to demand arbitration of the claims by first suing Charping in the Lexington County circuit court.

The circuit court heard the motion to compel arbitration on March 1, 2018. Ultimately, the court granted in part and denied in part Ludy's motion to compel arbitration. The circuit court first found Ludy did not waive the right to arbitrate. The court noted, "In an abundance of caution, Defendant Ludy filed an Answer and Counterclaim on July 14, 2017 and noted in the pleading that the Court must decide his Motion to Dismiss or Stay and Compel Arbitration." The court also determined some of the causes of...

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