Rhodes v. Benson Chrysler-Plymouth, Inc.

• Decision Date: 31 May 2007
• Docket Number: No. 4222.,4222.
• Citation: 647 S.E.2d 249
• Parties: Brandi RHODES, Respondent, v. BENSON CHRYSLER-PLYMOUTH, INC. d/b/a Benson Chrysler-Plymouth Dodge, Inc., Appellant.
• Court: South Carolina Court of Appeals

647 S.E.2d 249

Brandi RHODES, Respondent, v. BENSON CHRYSLER-PLYMOUTH, INC. d/b/a Benson Chrysler-Plymouth Dodge, Inc., Appellant.

No. 4222.

Court of Appeals of South Carolina.

Withdrawn, Substituted, and Refiled May 31, 2007.

Bradford N. Martin, Laura W.H. Teer, Lora E. Collins, and Robin Foster, of Greenville, for Appellant.

Lane W. Davis, of Greenville, for Respondent.

KITTREDGE, J.:

Benson Chrysler-Plymouth, Inc. appeals the denial of its motion to compel arbitration. We affirm.¹ We hold a party waives its right to enforce an arbitration provision when it delays in demanding arbitration and engages in extensive discovery resulting in prejudice to the party opposing arbitration.

I.

In April 2005, Brandi Rhodes sued Benson Chrysler-Plymouth, Inc. (Benson) for breach of contract in connection with the purchase of a vehicle.² Benson answered, pleading the contract contained an arbitration provision that encompassed Rhodes' allegations. Benson, however, did not promptly pursue arbitration, opting instead to engage in extensive discovery. Benson and Rhodes exchanged written interrogatories and requests for production. Benson also noticed and took five depositions. Benson sought the circuit court's assistance in executing out-of-state subpoenas, which the circuit court granted. The circuit court heard two motions for protective orders.

In February 2006, ten months after Rhodes initiated this action, Benson filed a motion to compel arbitration. Rhodes opposed Benson's attempt to resurrect its right to arbitrate under the contract. Rhodes argued Benson waived its right to compel arbitration by participating in significant discovery before pursuing arbitration. The circuit court agreed with Rhodes, and denied Benson's motion to compel arbitration. It further appears that the case was scheduled for trial before the circuit court ruled on Benson's motion to compel arbitration. Benson appeals.

II.

"[D]etermining whether a party waived its right to arbitrate is a legal conclusion subject to de novo review; nevertheless, the circuit judge's factual findings underlying that conclusion will not be overruled if there is any evidence reasonably supporting them." Liberty Builders, Inc. v. Horton, 336 S.C. 658, 664-65, 521 S.E.2d 749, 753 (Ct.App. 1999).

III.

South Carolina favors arbitration. Gen. Equip. & Supply Co. v. Keller Rigging & Constr., Inc., 344 S.C. 553, 556, 544 S.E.2d 643, 645 (Ct.App.2001). The right to enforce an arbitration clause, however, may be waived. Liberty Builders, Inc. v. Horton, 336 S.C. 658, 665, 521 S.E.2d 749, 753 (Ct. App.1999). "In order to establish waiver, a party must show prejudice through an undue burden caused by delay in demanding arbitration." Id. "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.

Generally, the factors our courts consider to determine if a party waived its right to compel arbitration are: (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. These factors, of course, are not mutually exclusive, as one factor may be inextricably connected to, and influenced by, the others.

Thus, a party may waive its right to compel arbitration if a substantial length of time transpires between the commencement of the action and the commencement of the motion to compel arbitration. What is "a substantial length of time" varies from one case to the next, depending on the extent of discovery conducted and the corresponding presence or absence of prejudice to the party opposing arbitration. Compare Deloitte & Touche, LLP v. Unisys Corp., 358 S.C. 179, 184, 594 S.E.2d 523, 526 (Ct.App.2004) (finding a five-and-a-half year period where the parties "conducted a significant amount of discovery, resulting in the production of thousands of documents" demonstrated waiver); and Evans v. Accent Manufactured Homes, Inc., 352 S.C. 544, 548, 575 S.E.2d 74, 75-76 (Ct.App.2003) (finding a nineteen month period where the parties exchanged written interrogatories, requests to produce, and the party requesting arbitration took two depositions demonstrated waiver); and Liberty Builders, 336 S.C. at 666, 521 S.E.2d at 753-54 (finding a two-and-a-half year period where the parties sought assistance from the court on approximately forty occasions demonstrated waiver); with Toler's Cove Homeowners Ass'n, Inc. v. Trident Constr. Co., 355 S.C. 605, 612, 586 S.E.2d 581, 585 (2003) (finding a thirteen month period where discovery was "very limited in nature and the parties had not availed themselves of the court's assistance," and "Respondent had not held any depositions," did not demonstrate waiver); and Rich v. Walsh, 357 S.C. 64, 67, 590 S.E.2d 506, 507 (Ct.App.2003) (finding a thirteen month period where "[l]imited discovery was conducted" and the party requesting arbitration took one deposition lasting fifteen minutes did not demonstrate waiver); and Gen. Equip., 344 S.C. at 557, 544 S.E.2d at 645 (finding a period of less than eight months where the "litigation consisted of routine administrative matters and limited discovery which did not involve the taking of depositions or extensive interrogatories" did not establish waiver).

To establish prejudice, the non-moving party must show something more than "mere inconvenience." Evans, 352 S.C. at 550, 575 S.E.2d at 76-77. To ascertain whether the non-moving party was prejudiced, our courts often examine whether the party requesting arbitration took "advantage of the judicial system by engaging in discovery." Id. at 548, 575 S.E.2d at 76. This inquiry, however, is just part of a broader, common sense approach our courts take to determine whether a motion to compel arbitration should be granted or denied: (1) if the parties conduct little or no discovery, then the party seeking arbitration has not taken "advantage of the judicial system," prejudice will likely not exist, and the law would favor arbitration; (2) if the parties conduct significant discovery, then the party seeking arbitration has taken "advantage of the judicial system," prejudice will likely exist, and the law would disfavor arbitration. Of course, cases do not always fit neatly into clearly defined categories, which is why our law resists a formulaic approach and motions to compel...