|
What Claims are Subject to a Broad Arbitration Agreement in South Carolina?
The South Carolina Supreme Court recently addressed the issue of what claims must be arbitrated under a broad arbitration clause in South Carolina. In this case, the arbitration clause at issue was contained within a agreement for investment services and was as follows: "any controversy arising out of or relating to any of my accounts or transactions with you, your officers, directors, agents and/or employees for me, to this agreement, or the breach thereof . . . from the inception of such account shall be settled by arbitration." The plaintiff in this action alleged that his investment funds were transferred electronically to a third party without his authorization or consent and brought claims for breach of contract, breach of contract accompanied by a fraudulent act, negligence, breach of fiduciary duty, and violation of SCUTPA. The issue arose whether all of these claims had to be arbitrated per the agreement. The circuit court found that all the claims indeed fell under the arbitration agreement. Defendants appealed this decision.
The Supreme Court stated that "arbitration is a matter of contract" and "broadly-worded arbitration agreements apply to disputes in which a 'significant relationship' exists between the asserted claims and the contract containing the agreement to arbitrate." However, the court clarified by stating that "the mere fact that the dispute would not have arisen but for the existence of the contract and consequent relationship between the parties is insufficient." Further, the court stated that actions "outside the contemplation of the parties' agreement to arbitrate" are not subject to the agreement. Thus, the court held that at the time plaintiff entered into this arbitration agreement, he could not have contemplated negligence or a violation of SCUTPA to arise and therefore, these claims were not subject to arbitration. However, this holding does not create a blanket rule that SCUTPA claims are not subject to arbitration; the South Carolina Court of Appeals recently found that a SCUTPA claim was subject to arbitration due to the significant relationship between the contract and the claim.
Thus, when an arbitration agreement is entered into in South Carolina, the parties should be aware that when issues arise between the parties, all claims will not necessarily be subject to arbitration, it will be a case-by-case analysis evaluating the significance of the relationship between the contract and the claim.
|
