Davis v. KB HOME OF SOUTH CAROLINA, INC.
713 S.E.2d 799
S.C. Ct. App.2011Background
- Davis applied for employment with KB Home on Jan 12, 2006, and the application contained an arbitration clause expiring after 30 days.
- On Mar 13, 2006, Davis was offered the VP of Finance position and signed an employment agreement with a merger clause stating the letter contains all agreements.
- KB Home terminated Davis on Jul 20, 2007, and he sued on Mar 3, 2008 for breach of contract, wage claims, wrongful termination/retaliation, and defamation.
- Discovery proceeded with multiple interrogatories, document productions, and five scheduled depositions before arbitration was sought.
- In Sep 2009, eighteen months after filing suit, KB Home and Meyer moved to compel arbitration and stay proceedings; Davis opposed, asserting merger clause superseded the arbitration clause and arguing waiver and unconscionability.
- The circuit court denied the motion to compel arbitration, and Appellants appealed challenging threshold arbitrability, waiver, and unconscionability arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides threshold arbitrability? | Davis argues merger clause renders arbitration clause invalid; circuit court should decide. | Appellants contend the arbitrator should decide arbitrability once threshold issues are framed. | Circuit court properly decided gateway arbitrability as a matter of contract law. |
| Did waiver bar enforcement of arbitration? | Waiver not shown; long litigation period and discovery do not prejudice arbitration rights. | Eighteen-month delay and extensive discovery prejudiced Davis by undermining arbitration. | Court affirmed denial on waiver basis; delay and discovery prejudiced the movants. |
| Is the arbitration clause an unconscionable contract of adhesion? | Arbitration clause is unconscionable/adhesive and unenforceable. | Clause is enforceable; merger clause does not undermine it in the prior application. | Not reached; merger clause nullified the arbitration clause, so unconscionability claim unnecessary. |
Key Cases Cited
- Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14 (2007) (arbitrability and gateway matters; de novo review and parol evidence considerations)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (arbitration clause validity; severability of the arbitration provision)
- Munoz v. Green Tree Financial Corp., 343 S.C. 531 (2001) (general contract principles apply to FAA arbitration clauses)
- Wilson v. Landstrom, 281 S.C. 260 (Ct.App. 1984) (merger/integration clauses; parol evidence limits)
- U.S. Leasing Corp. v. Janicare, Inc., 294 S.C. 312 (Ct.App. 1988) (integration clauses; parol evidence rule and complete integration)
- Great W. Coal v. South Carolina Public Service Authority, 312 S.C. 559 (1993) (arbitration as a contractual matter; severability concepts referenced)
- Zabinski v. Bright Acres Assocs., 346 S.C. 580 (2001) (contractual formation; enforceability of arbitration clause)
- Blackwell v. Faucett, 117 S.C. 60 (Ct.App. 1921) (parol evidence and integration language considerations)
- Pee Dee Stores, Inc. v. Doyle, 381 S.C. 234 (Ct. App. 2009) (parol evidence rule and merger clause interpretation)