Parsons v. John Wieland Homes & Neighborhoods of the Carolinas, Inc.
2016 S.C. LEXIS 227
S.C.2016Background
- JWH developed a residential subdivision on a former industrial/textile site, demolished visible structures, and sold homes and lots.
- The Parsons purchased a home in 2007, signed a purchase agreement that incorporated a JWH Warranty containing a broad arbitration clause, and acknowledged receipt of the Warranty/handbook.
- In 2008 hazardous PVC pipes and a metal-lined concrete box containing hazardous sludge were discovered on the Parsons’ property; JWH contracted with DHEC and completed a cleanup at its cost.
- The Parsons sued in 2011 alleging failure to disclose contamination and asserted breach of contract, breach of implied warranties, negligence, negligent misrepresentation, unfair trade practices, fraud, and related claims.
- JWH moved to compel arbitration under the incorporated Warranty arbitration clause; the circuit court denied the motion, the Court of Appeals affirmed on the ground the arbitration clause was limited to Warranty claims, and the Supreme Court granted certiorari.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration clause covers the Parsons’ claims | Parsons: clause is limited to Warranty claims (located in Warranty booklet) and does not encompass claims for concealed contamination; also outrageous-torts exception applies | JWH: paragraph 21 incorporated the Warranty and its arbitration clause broadly; claims “arise out of or relate to” the purchase/home so they are arbitrable | Held: arbitration clause is broad and covers the claims; Court of Appeals erred to limit scope to Warranty only |
| Whether the “outrageous torts” exception prevents arbitration | Parsons: allegations of intentional/non‑disclosed hazardous contamination are outrageous and unforeseeable, so exception bars arbitration | JWH: outrageous torts exception should not negate a generally worded arbitration clause under FAA precedent | Held: majority opinion (plurality) finds the exception remains viable in SC, but the lead opinion (who would overrule) concludes Concepcion undermines the exception; the Court ultimately enforces arbitration here (scope dispositive) |
| Whether the arbitration clause is unconscionable | Parsons: clause is one-sided and therefore unconscionable | JWH: clause is standard and not biased; governed by FAA and general contract law | Held: unconscionability challenge rejected; clause not unconscionable |
| Standard of review and presumption in favor of arbitration | Parsons: N/A (argues limits) | JWH: disputes are subject to de novo review on arbitrability; courts must construe doubts in favor of arbitration | Held: determination of arbitrability is reviewed de novo; heavy presumption in favor of arbitration applies |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (state rules that single out arbitration are preempted; arbitration agreements enforced like other contracts)
- DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015) (lower courts must follow Concepcion; state courts cannot apply rules that effectively treat arbitration agreements differently)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (arbitration clauses are separable from the merits of the contract)
- Zabinski v. Bright Acres Assocs., 346 S.C. 580 (S.C. 2001) (scope inquiry: factual allegations determine arbitrability; presumption in favor of arbitration)
- Aiken v. World Fin. Corp. of S.C., 373 S.C. 144 (S.C. 2007) (South Carolina’s “outrageous torts” exception to arbitration recognizing some torts as legally distinct and unforeseeable, potentially outside arbitration)