889 S.E.2d 564
S.C.2023Background
- Hicks Unlimited (South Carolina) contracted with UniFirst (Massachusetts) for employee uniform rental; the contract included an arbitration clause specifying arbitration under the AAA Expedited Procedures and stating disputes "shall be governed by the Federal Arbitration Act (FAA)."
- A dispute arose and UniFirst moved to compel arbitration; Hicks argued the arbitration provision was unenforceable because it failed to satisfy the South Carolina Arbitration Act (SCAA) notice requirements.
- UniFirst asserted the FAA governed and preempted the SCAA; the circuit court denied the motion to compel, finding the contract did not involve interstate commerce and therefore the FAA did not apply.
- The Court of Appeals reversed, concluding the contract implicated interstate commerce (citing shipments from Kentucky and payments to Massachusetts); the Supreme Court granted certiorari to resolve whether the FAA applied.
- The Supreme Court held parties cannot invoke FAA preemption merely by agreeing the FAA governs; a party seeking to compel arbitration under the FAA must prove the contract involves interstate commerce in fact.
- The Court also held the record lacked competent evidence that the Hicks–UniFirst contract involved interstate commerce and that the Court of Appeals erred by relying on facts first asserted in postjudgment filings.
Issues
| Issue | Hicks' Argument | UniFirst's Argument | Held |
|---|---|---|---|
| Whether parties can contractually designate the FAA to govern and thereby invoke FAA preemption even if the contract is intrastate | The FAA applies only if the contract involves interstate commerce; parties cannot manufacture that by agreement | Parties may agree the FAA governs and that is sufficient to invoke federal preemption | Rejected UniFirst: parties cannot bootstrap FAA preemption by contractual language; §2's interstate-commerce requirement must be met with commerce in fact |
| Whether the Hicks–UniFirst contract involved interstate commerce | The contract was intrastate; FAA does not apply | The contract involved interstate commerce (uniforms shipped from KY; payments processed in MA; UniFirst headquartered in MA) | The contract did not involve interstate commerce in fact on the record; FAA does not apply; circuit court order denying arbitration affirmed |
| Whether appellate court could rely on facts first raised in a motion to alter/briefs to find interstate commerce | New facts raised postjudgment are not proper evidence on appeal | Court of Appeals relied on those asserted facts to find interstate commerce | Holding: appellate reliance on facts asserted for first time in postjudgment filings was improper; statements in motions/briefs are not evidence |
Key Cases Cited
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (federal law preempts state law to the extent state law would undermine FAA objectives)
- Bernhardt v. Polygraphic Co. of Am., 350 U.S. 198 (FAA does not apply absent §2 interstate-commerce connection)
- New Prime Inc. v. Oliveira, 139 S. Ct. 532 (antecedent §2 commerce requirement limits courts' powers under §§3 and 4)
- Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (party invoking FAA must show the contract involves "commerce in fact")
- Southland Corp. v. Keating, 465 U.S. 1 (FAA's reach is limited to transactions involving interstate commerce)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (FAA rests on Congress' commerce and admiralty powers)
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 ("involving commerce" equated with "affecting commerce" for commerce clause scope)