Do South Carolina courts “favor” arbitration?

In memoranda in support of motions to compel arbitration, defense attorneys frequently attempt to buoy their arguments by arguing that “public policy favors arbitration.” While the language they employ was used in past decisions by our Court of Appeals and Supreme Court, the South Carolina Supreme Court has recently taken pains to dispel the myth that arbitration is afforded a special status by courts.

In Palmetto Construction Group, LLC v. Restoration Specialists, LLC, 432 S.C. 633, 856 S.E.2d 150 (2021), the South Carolina Supreme Court attempted to put this myth to bed once and for all by tracing the language of “favor” to its source. The Supreme Court noted that while it held that the “policy favoring the arbitration of disputes is… well established in South Carolina” in Trident Technical College v. Lucas & Stubbs, Ltd., 286 S.C. 98, 103, 333 S.E.2d 781, 785 (1985), the Court did not “mean to give the law of arbitration such special status that it would supplant state procedural law.” Palmetto Construction, 432 S.C. at 639, 856 S.E.2d at 153. Instead, the Court held,  “Our statements that the law ‘favors’ arbitration mean simply that courts must respect and enforce a contractual provision to arbitrate as it respects and enforces all contractual provisions. There is, however, no public policy—federal or state—’favoring’ arbitration.” Id.

For businesses in South Carolina, this means that courts will not “rescue them “come to the rescue” in the event that a deficiency in the formation of an agreement to arbitrate is discovered or the terms of an agreement to arbitrate are declared unconscionable. Agreements to arbitrate are contracts, and, according to the South Carolina Supreme Court, are to be held to the same standards as all other contracts. To discuss how your business could benefit from an arbitration agreement, or to determine if the agreements you have in place are sufficient to protect your business, contact us.

This website is for information purposes only. The information should not be construed to constitute formal legal advice or the formation of an attorney/client relationship. A result achieved on behalf of one client does not necessarily indicate similar results can be obtained for other clients. For information, contact Greg Studemeyer at (803) 393-4399.