Is it easy to get out of arbitration in South Carolina? That’s the question we’ll look at today.
Arbitration agreements and clauses are ubiquitous these days, from employment contracts to online End-User License Agreements. Arbitration is often touted as being a faster, less expensive, and more private alternative to civil lawsuits and civil court. But arbitration agreements can put individuals at a disadvantage by requiring them to waive their rights or burden them with lopsided terms. This may prompt them to try to get out of arbitration.
Maybe you’re a customer or consumer who doesn’t want to be bound to arbitration. Or maybe you’re a business owner or professional who wants to ensure the arbitration agreements in your contracts are enforceable. Whatever your situation, you should understand when arbitration is enforced and when it’s not in South Carolina so you can better look after your own interests.
First we’ll look at what makes a contract enforceable and unenforceable in South Carolina, then dive into some cases to see how these issues played out in the courts.
Are Arbitration Agreements Always Binding in South Carolina?
Generally yes, but occasionally no.
Valid arbitration agreements are enforceable in South Carolina. In the 2020 case Weaver v. Brookdale Senior Living, Inc. (which we’ve previously covered here), the South Carolina Court of Appeals stated that there is “potent” public policy favoring arbitration when the terms are entered into validly.
What constitutes a valid and enforceable contract in South Carolina? To start, parties signing the contract must have the authority and capacity to understand and enter into such an agreement. The contract also must:
- Be mutually agreed upon
- Be freely entered into
- Include “consideration,” an exchange of values between the parties, such as money or the promise of a service
- Not violate public policy
Since South Carolina courts view and treat arbitration agreements as they do any other part of a contract, these same standards apply.
In short, there’s no way to “get out” of a valid arbitration agreement in South Carolina.
Reasons an Arbitration Agreement May Be Unenforceable (Or, How to Get Out of Arbitration)
Arbitration agreements are not enforceable in South Carolina if they are not valid. Arbitration clauses within a contract may also be found to be unenforceable.
Reasons an arbitration agreement may found to be unenforceable (this list is not exhaustive):
- Absence of signature
- Fraud
- Duress or coercion
- Lack of authority to sign the agreement
- Lack of capacity (aka sound mind)
- Lack of mutual agreement
- Lack of consideration
- Unconscionability
- Unclear language
Proving an arbitration agreement is unenforceable can be difficult, but it does happen. Next we’ll look at cases where arbitration agreements were successfully challenged in court.
Lack of Authority to Enter into Arbitration Agreement without Power of Attorney: Solesbee
In some cases, the enforceability of an arbitration agreement comes down to small details. That’s what happened in the 2022 South Carolina Court of Appeals case The Estate of Mary Solesbee v Fundamental Clinic (read it here).
The Background
Mary Solesbee entered Magnolia, a skilled nursing facility in Spartanburg County, in June 2016. Her son, Allen Dover, signed the admission agreement and a separate arbitration agreement when she was admitted. On July 14, 2016, Solesbee was transported to a hospital, where she died two weeks later.
Connie Bayne, Solesbee’s personal representative, then filed a wrongful death and survival action alleging nursing home negligence for actual and punitive damages. In response, Magnolia filed a motion to compel arbitration.
The trial court denied the motion to compel arbitration, finding that Dover did not have the authority to sign the arbitration agreement on behalf of his mother and rendering it invalid. On appeal, the SC Court of Appeals agreed with the trial court’s decision to deny Magnolia’s motion to compel arbitration.
The Details
The appeals court determined that the admission agreement and the arbitration agreement were two separate documents. Magnolia argued that the court should have found the two were merged, since merger is usually presumed when multiple documents are signed by the same parties at the same time as part of the same transaction.
But the court says that’s not always so. It found that the two documents were indeed separate because:
- The admission agreement provided it was governed by South Carolina law, while the arbitration agreement provided it was governed by federal law
- The arbitration agreement referenced the admission agreement, showing it was conceived of as a separate document
- Each document was separately paginated with its own signature page
Additionally, the arbitration agreement was not a requirement for admission to Magnolia.
This matters because Bayne (Solesbee’s representative who brought the suit) argued that Dover (her son) did not have the authority to sign the arbitration agreement on his mother’s behalf. He did not have power of attorney for his mother at the time (and had only briefly possessed such powers years earlier before they were revoked) and did not have the authority to sign under any other legal theory.
He did, however, have the authority to sign the admission agreement under South Carolina’s Adult Health Care Consent Act. This act is limited to making health care related decisions only, and therefore did not give Solesbee’s son the power to sign the separate arbitration agreement.
Ultimately, because of how Magnolia wrote and structured its contracts, the court found that it could not compel arbitration.
Other Examples of Unenforceable Arbitration Agreements in South Carolina
Here are brief overviews of three other South Carolina cases in which arbitration agreements or sections were found to be unenforceable.
Lack of Authority Even with Power of Attorney: Arredondo
In Arredondo v. SNH SE Ashley River Tenant, LLC (2021), the South Carolina Supreme Court found that a daughter did not have the authority to sign an arbitration agreement on behalf of her father, despite being his agent under both a health care power of attorney and a general durable power of attorney. This case came down to the very specific wording in the powers of attorney, and it demonstrates how enforceability of a contract can hinge on language and word choice.
(The daughter also contended that the agreement was unconscionable and therefore unenforceable, but the court did not address this issue.)
Read more in detail about powers of attorney and the full story behind Arredondo in our blog on this case here.
Lack of Authority Due to Timing: Stott v White Oak Manor
In Stott v White Oak Manor, Inc. (2019), the South Carolina Court of Appeals found that a niece did not have the authority to sign an arbitration agreement on behalf of her uncle. There are two important elements in this case: One, capacity. The uncle possessed “intact mental functioning” at the time of his admission into a medical facility and therefore had the capacity to enter into agreements himself. Two, timing. A power of attorney that would have given the niece authority to enter into the agreement on his behalf was not recorded – and therefore not valid – until six days after her uncle was admitted to the facility.
Read more in detail about the background and the court’s reasoning in our blog on Stott here.
Unconscionability: Huskins v Mungo Homes
In Huskins v Mungo Homes (2022), the South Carolina Court of Appeals found that a portion of an arbitration clause within a purchase agreement was unconscionable and therefore unenforceable. It found the offending terms were absent of meaningful choice and were oppressive and one-sided, making them unconscionable.
Importantly, only the offending portion was severed from the clause, leaving the rest of the arbitration clause enforceable, and the court affirmed the circuit court’s order to compel arbitration under the newly modified terms.
Read more in detail about the background of this case and about unconscionability in our blog on Huskins v Mungo Homes here.
Understanding Arbitration and Reserving Your Rights
The examples of cases above show just how challenging it can be to get out of arbitration in South Carolina.
As a consumer, customer, or patient, you need to understand that the majority of the time, you are bound to arbitration when you agree to it. However, it’s not a given that you must agree; many contracts and agreements online allow you to opt out in writing within (typically) 30 days of signing the agreement. The next time you encounter a wall of text online that tells you to click the “I Agree” button, first look in the fine print for instructions on how to opt out of compelled arbitration and reserve your rights.
As a business owner or professional drafting an arbitration agreement or arbitration clause, you should know that the enforceability of your agreement can come down to terms, word choice, and other seemingly small details. It’s also important to ensure that the parties signing your agreement have the authority to do so.
Get Help with Contracts and Business Law in South Carolina
For help drafting or understanding arbitration agreements, employment contracts, and other contracts, contact Gem at the Gem McDowell Law Group. With over thirty years of experience, Gem along with his team helps South Carolina business owners grow their businesses and protect their interests and can represent individuals in contract disputes. Call to schedule your free consultation today at the Mount Pleasant office or Myrtle Beach office by calling 843-284-1021 today.
