Cape Romain Contractors, Inc. v. Wando E., LLC
747 S.E.2d 461
S.C.2013Background
- Wando E., LLC hired Barnes as general contractor to build a marina on the Wando River; Barnes subcontracted dock work to Cape Romain under an AIA standard-form contract.
- The Contract selected arbitration as the exclusive dispute-resolution method and expressly invoked the Federal Arbitration Act (FAA).
- Cape Romain stopped work, filed a mechanics’ lien and sued Barnes and Wando E. for payment and related relief; Cape Romain also alleged breach of contract against Barnes.
- Barnes and Wando E. moved to dismiss and compel arbitration; Cape Romain opposed, arguing (1) Wando E. is not a signatory and cannot compel arbitration, and (2) the FAA does not apply because the transaction did not sufficiently affect interstate commerce.
- The trial court denied the motion, finding no sufficient nexus to interstate commerce and that Wando E. could not enforce the arbitration clause; this interlocutory denial was appealed and certified to the Supreme Court of South Carolina.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the FAA apply (transaction involve interstate commerce)? | Barnes/Wando: materials, barges, navigable waters, out-of-state suppliers/engineers show interstate commerce. | Cape Romain: transaction was local; no sufficient interstate nexus to trigger FAA. | FAA applies — transaction involved channels and instrumentalities of interstate commerce and sufficiently affected interstate commerce. |
| Should arbitration be compelled under the Contract? | Barnes/Wando: Contract unambiguously selects arbitration and invokes the FAA; disputes fall within clause. | Cape Romain: Mechanics’ lien and related claims should proceed in court; FAA inapplicable. | Arbitration must be compelled; strong federal policy favors enforcing arbitration clauses. |
| Is the mechanics’ lien claim arbitrable? | Barnes/Wando: Lien claim depends on contract dispute and is covered by arbitration clause. | Cape Romain: Mechanics’ lien remedies are statutory and may require court action. | Mechanics’ lien claim arises from the Contract and is arbitrable. |
| Can non-signatory Wando E. be joined in arbitration? | Barnes/Wando: Contract permits joinder of entities substantially involved; Wando E. fits that description. | Cape Romain: Wando E. is not a signatory and lacks standing to compel arbitration. | Wando E. may be joined under the Contract’s joinder provisions; Barnes can compel arbitration and join Wando E. |
Key Cases Cited
- Landers v. Federal Deposit Ins. Co., 402 S.C. 100 (S.C. 2013) (FAA applies to arbitration agreements affecting interstate commerce)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (FAA’s reach aligns with Commerce Clause)
- Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (FAA’s reach is expansive; commerce-in-fact test)
- United States v. Lopez, 514 U.S. 549 (1995) (three categories of Commerce Clause power)
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) (aggregate economic activity test for commerce-power reach)
- United States v. Rands, 389 U.S. 121 (1967) (regulation of navigable waters as part of interstate commerce)
- Zabinski v. Bright Acres Assocs., 346 S.C. 580 (S.C. 2001) (use of out-of-state materials/actors indicates interstate commerce)
- Thomson-CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995) (arbitration is contractual in nature and courts enforce parties’ arbitration bargains)