S.C. SC: Arbitration clause OK, but banning class actions isn't

John O'Brien Apr. 20, 2010, 1:35pm


COLUMBIA, S.C. (Legal Newsline) - An auto dealership was right to request arbitration but should not have entered into an agreement forbidding class action lawsuits, the South Carolina Supreme Court has ruled.

The justices released a decision Monday in the case of a father who bought a car for his daughter as a graduation present from Century BMW and subsequently filed a class action. The agreement Michael Watts entered into with Century provided that any dispute between the parties was subject to arbitration.

The class action alleged Century and other car dealers in the state charged illegal administrative fees, and the company moved to compel arbitration. A lower court ruled for Watts, calling the arbitration agreement unconscionable.

"(T)he arbitration agreement is a separate, one-page document which both Michael and Christine Watts signed," says the opinion, authored by Justice John Kittredge.

"It is clearly labeled to be an arbitration agreement at the top of the document in bold, capital, and underlined font. The important terms and provisions of the agreement appear in the body of the contract and again in capital letters just above the signature line.

"The Wattses both admitted they did not read the arbitration agreement, and their deposition testimony confirmed the failure to read the documents was solely attributed to them and not to Century's actions."

However, Kittredge wrote that a ban on class actions is against public policy. Century said if the ban on class actions was unenforceable, it would drop its arbitration efforts.

The court, therefore, denied the company's motion to compel arbitration.

"Stated succinctly, the Legislature has made clear that the public policy of this state is to provide consumers with a non-waivable right to bring class action suits for violations of the Dealers Act and that any contract prohibiting a class action suit violates our state's public policy and is void and unenforceable," the opinion says.

"We note that courts across the country are split over whether an arbitration agreement may include a waiver of the right to bring a class action suit. We are guided by our state law, and the unmistakable statutory language contained in the Dealers Act indicating our Legislature intended for this to be a non-waivable right."

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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