Towles v. United Healthcare Corp., 3077.

CourtCourt of Appeals of South Carolina
Citation524 S.E.2d 839,338 S.C. 29
Decision Date22 November 1999
Docket NumberNo. 3077.,3077.
PartiesWinfield C. TOWLES, M.D., Respondent, v. UNITED HEALTHCARE CORPORATION, Physicians Health Plan, Inc., William E. Martin, Rebecca Estefano, and Cheryl Parrott, Appellants.

338 S.C. 29
524 S.E.2d 839

Winfield C. TOWLES, M.D., Respondent,
v.
UNITED HEALTHCARE CORPORATION, Physicians Health Plan, Inc., William E. Martin, Rebecca Estefano, and Cheryl Parrott, Appellants

No. 3077.

Court of Appeals of South Carolina.

Heard October 7, 1999.

Decided November 22, 1999.


338 S.C. 33
Vance J. Bettis, of Gignilliat, Savitz & Bettis; J. Lewis Cromer, of Cromer & Mabry; and Ernest J. Nauful Jr., of Ernest J. Nauful, P.C., all of Columbia, for appellants

Frederick A. Gertz and Benjamin L. Sadler, III, both of Gertz & Moore, of Columbia, for respondent.

HEARN, Judge:

United HealthCare Corporation (United) appeals from a circuit court order denying United's motion to compel arbitration. We reverse.

FACTS

United is a nationwide company headquartered and incorporated in Minnesota which maintains offices, corporate subsidiaries, HMO's, and managed health plans under management contracts throughout the United States. In South Carolina, United provides managerial and other related services for the South Carolina corporation, Physician's Health Plan (PHP). Winfield C. Towles began working as a medical director for United in September 1995 and was assigned to PHP.1

In February 1996, Towles signed a Code of Conduct and Employee Handbook Acknowledgment form (the Acknowledgment). The Acknowledgment stated that "the provisions in

338 S.C. 34
this Handbook are guidelines and, except for the provisions of the Employment Arbitration Policy, do not establish a contract or any particular terms or condition of employment between myself and [United]." The Employment Arbitration Policy, which is summarized in the Acknowledgment and employee handbook, stated in part: "Arbitration is the final, exclusive and required forum for the resolution of all employment related disputes which are based on a legal claim."

In September 1996, United terminated Towles. According to Towles, a former co-worker subsequently told an employee of a different hospital that United terminated Towles for sexual harassment.

Towles then sued United, PHP, PHP's president, and two co-workers alleging defamation, conspiracy, negligent supervision, wrongful discharge, unfair or deceptive trade practices, and reckless or intentional infliction of emotional distress. In response, United filed a motion to dismiss, or in the alternative, a motion to compel arbitration. The circuit court denied United's motion to dismiss. The circuit court also denied United's motion to compel arbitration "with leave to refile it after completing discovery in this action." United appeals, contending the circuit court erred in denying United's motion to compel arbitration under the Federal Arbitration Act (FAA). See 9 U.S.C.A. § 1 et seq. (1999).

DISCUSSION

We must initially determine whether United may appeal from the circuit court's order. United contends the circuit court's order is appealable under both federal and state law. We agree.

Both federal and state policy favor arbitrating disputes. Heffner v. Destiny, Inc., 321 S.C. 536, 537, 471 S.E.2d 135, 136 (1995) ("The policy of the United States and this State is to favor arbitration of disputes."). This preference for arbitration has manifested itself in legislation and judicial decisions supporting the expeditious appeal of decisions denying an application to compel arbitration.

The FAA states: "An appeal may be taken from ... an order ... denying an application under section 206 of this title to compel arbitration." 9 U.S.C.A. § 16(a)(1)(C) (1999). Enacting this provision revealed Congress's "deliberate determination

338 S.C. 35
that appeal rules should reflect a strong policy favoring arbitration." Stedor Enter., Ltd. v. Armtex, Inc., 947 F.2d 727, 730 (4th Cir.1991) (quoting 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3914.34, at 412 (Supp.1990))

South Carolina's statutory law provides a similar framework. South Carolina's Uniform Arbitration Act states: "[a]n appeal may be taken from ... [a]n order denying an application to compel arbitration made under § 15-48-20." S.C.Code Ann. § 15-48-200(a)(1) (Supp.1998). Therefore, "an order that favors litigation over arbitration—whether it refuses to stay the litigation in deference to arbitration; refuses to compel arbitration; ... or grants, continues, or modifies an injunction against arbitration—is immediately appealable, even if interlocutory." Stedor, 947 F.2d at 730 (emphasis added).

The circuit court's order stated: "[D]efendants' motion to compel arbitration is denied, at this time, with leave to refile it at the completion of discovery in this action." The circuit court's order favored litigation over arbitration by refusing to compel arbitration until the parties conducted additional discovery. Therefore, United may appeal the circuit court's order denying its motion to compel arbitration. See 9 U.S.C.A. § 16(a)(1)(C) (1999); S.C.Code Ann. § 15-48-200(a)(1) (Supp.1998); Stedor, 947 F.2d at 730.

Having concluded the circuit court's order is appealable, we now address United's contention that the circuit court erred in denying United's motion to compel arbitration under the FAA. To analyze United's contention we must evaluate (1) whether the FAA applies, (2) whether United and Towles formed a valid and binding arbitration agreement, and (3) whether the agreement covers Towles's claims.

I.

For the FAA to apply, an agreement must "evidenc[e] a transaction involving commerce," specifically interstate commerce.2 9 U.S.C.A. § 2 (1999); see also Soil Remediation

338 S.C. 36
Co. v. Nu-Way Envtl., Inc., 323 S.C. 454, 460, 476 S.E.2d 149, 152 (1996). The terms "involving commerce" amount to the functional equivalent of "affecting commerce" and signal "an intent to exercise Congress' commerce clause power to the full." Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); see also Mathews v. Fluor Corp., 312 S.C. 404, 407, 440 S.E.2d 880, 881 (1994) ("The requirement that the underlying transaction involve commerce is to be broadly construed so as to be coextensive with congressional power to regulate under the Commerce Clause."). The phrase "evidencing a transaction" only requires "that the `transaction' in fact `involv[e]' interstate commerce, even if the parties did not contemplate an interstate commerce connection." Allied-Bruce Terminix Co., 513 U.S. at 277-81, 115 S.Ct. 834. To ascertain whether a transaction involves commerce within the meaning of the FAA, the court must examine the agreement, the complaint, and the surrounding facts. Soil Remediation Co., 323 S.C. at 460, 476 S.E.2d at 152

Towles's responsibilities included helping to establish medical policy, overseeing utilization review and quality management for plan participants, attending out of state conferences, participating in telephone conferences with United's corporate medical affairs staff in Minnesota, and reviewing claims from out-of-state providers and specialty providers located in North Carolina and Georgia. Towles participated in sales presentations in South Carolina and Georgia and worked with officials from national companies in resolving questions of utilization review and medical necessity for PHP participants. Towles also reviewed proposals for services from out-of-state medical and ancillary service providers. We find Towles's activities provide sufficient evidence of interstate commerce to invoke the FAA. See Allied-Bruce Terminix Co., 513 U.S. at 277, 115 S.Ct. 834 (noting the FAA signaled Congress's intent to exercise its Commerce Clause powers to the full).

Because interstate commerce is involved, the FAA applies and displaces South Carolina's Uniform Arbitration Act. See Soil Remediation Co., 323 S.C. at 459-60, 476 S.E.2d at 152 (noting the FAA preempts South Carolina's Uniform Arbitration Act). Therefore, if an arbitration agreement which covers Towles's claims exists, the FAA requires arbitration.

338 S.C. 37
II.

United contends the Acknowledgment created a valid, binding agreement requiring arbitration. We agree.

Arbitration is available only when the parties involved contractually agree to arbitrate. General Drivers, Warehousemen and Helpers Local Union No. 509 v. Ethyl Corp., 68 F.3d 80, 83 (4th Cir.1995). There is a strong presumption in favor of the validity of arbitration agreements because of the strong policy favoring arbitration. O'Neil v. Hilton Head Hosp., 115 F.3d 272, 273 (4th Cir.1997); Heffner, 321 S.C. at 537, 471 S.E.2d at 136. In determining whether an agreement to arbitrate exists, "the court should apply `ordinary state-law principles that govern the formation of contracts.' " Johnson v. Circuit City Stores, 148 F.3d...

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