Jessica Bennett v. ACS Primary Care Physicians-Southeast P.C.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Jessica Bennett and Thuy N. Gasser, individually and on
behalf of those similarly situated, Respondents,

v.

ACS Primary Care Physicians-Southeast P.C., Appellant.

Appellate Case No. 2021-001342

Appeal From Horry County
Steven H. John, Circuit Court Judge

Opinion No. 6089
Heard May 6, 2024 – Filed September 18, 2024

REVERSED AND REMANDED

A. Victor Rawl, Jr., Julie Christine Fekete, and Nosizi
Ralephata, all of Gordon & Rees LLP, of Charleston, for
Appellant.

William Camden Lewis, of Columbia, and Christopher
James Moore, of Florence, both of Richardson Thomas,
LLC, for Respondent Jessica Bennett.

Ian Andrew Taylor, of Morris Law Firm, of Surfside
Beach; Robert Morris Hadden, of Hadden Law Firm, LLC,
of Mount Pleasant; Joseph Clay Hopkins, of Charleston;
and Jeffrey D. Morris, of Myrtle Beach, for Respondent
Thuy N. Gasser.
GEATHERS, J.: In these two consolidated appeals, Appellant ACS Primary Care
Physicians-Southeast P.C. (Provider) seeks review of the circuit court's orders
denying Provider's respective motions to compel arbitration. Provider argues that
Respondents, Jessica Bennett and Thuy N. Gasser (collectively, Insureds), are
estopped from avoiding the application of the arbitration provisions in Provider's
respective contracts with Insureds' health insurer, Blue Cross Blue Shield of South
Carolina (Insurer), because Insureds seek to enforce the contracts based on their
status as third-party beneficiaries. We reverse and remand for orders compelling
arbitration and staying Insureds' claims.

FACTS/PROCEDURAL HISTORY

According to Jessica Bennett's Class Action Complaint, on December 16,
2018, Provider's medical professionals treated Bennett in the emergency room at
Mary Black Memorial Hospital in Spartanburg for injuries Bennett suffered in a car
accident. Bennett was covered under a health insurance policy issued by Insurer
through her employer. Insurer and Provider had previously entered into an
Individual Preferred Provider Agreement allowing Provider the benefits of
becoming a "Network Provider" and requiring Provider to file claims for covered
services with Insurer and to accept negotiated rates for covered services.
Nonetheless, instead of filing a claim with Insurer for services rendered to Bennett,
Provider billed Bennett directly for $1,050.00, applying rates that were higher than
the rates negotiated with Insurer.

Similarly, according to Thuy Gasser's Class Action Complaint, in December
2019, Provider's medical professionals treated Gasser in the emergency room at
Grand Strand Regional Medical Center in Myrtle Beach for injuries Gasser suffered
in a car accident. Gasser was covered under a health insurance policy issued by
Insurer through an individual health insurance exchange. Insurer and Provider had
previously entered into an Individual Health Insurance Exchange ("HIX") Preferred
Provider Agreement allowing Provider the benefits of becoming a "HIX Network
Provider" and requiring Provider to file claims for covered services with Insurer and
to accept negotiated rates for covered services.1 Nonetheless, instead of filing a
claim with Insurer for services rendered to Gasser, Provider billed Gasser directly
for $1,622.00, applying rates that were higher than the rates negotiated with Insurer.

1
For purposes of analyzing the issues in this case, we will refer to Provider's
respective contracts with Insurer collectively as the "Provider Agreements."
On March 17, 2020, Bennett filed one of the two class actions underlying
these consolidated appeals, asserting claims for breach of contract (based on each
putative class member's status as a third-party beneficiary of the Provider
Agreement), 2 unjust enrichment, and "Equity." On May 21, 2020, Gasser filed the
second class action, asserting claims for breach of contract/third-party beneficiary
and unjust enrichment. After both actions were removed to federal court and
subsequently remanded to the circuit court, Provider filed its respective motions to
compel arbitration and stay or dismiss Insureds' claims. In its supporting briefs,
Provider asserted that Insureds were bound by the respective arbitration provisions
in the Provider Agreements because their assertion of third-party beneficiary status
estopped them from avoiding those provisions.

The circuit court denied the respective motions, concluding that Insureds were
"completely unaware that the [Provider Agreements] existed when [they] received
[their] medical treatment." Subsequently, the circuit court denied Provider's motion
for reconsideration in Bennett's class action. 3 These appeals followed.

STANDARD OF REVIEW

2
See Hardaway Concrete Co. v. Hall Contracting Corp., 374 S.C. 216, 225, 647
S.E.2d 488, 492–93 (Ct. App. 2007) ("[I]f a contract is made for the benefit of a third
person, that person may enforce the contract if the contracting parties intended to
create a direct, rather than an incidental or consequential, benefit to such third
person." (quoting Bob Hammond Constr. Co. v. Banks Constr. Co., 312 S.C. 422,
424, 440 S.E.2d 890, 891 (Ct. App. 1994))).
3
There is nothing in the record to indicate that Provider filed a motion for
reconsideration in Gasser's class action. However, at that stage of the litigation,
Bennett and Gasser had been represented by the same attorney, who had filed
identical motions to compel in each action, and the circuit court judge, who heard
the same motions in both actions, had already denied Bennett's motion for
reconsideration when he denied Gasser's motion to compel. Under these
circumstances, filing a motion for reconsideration in Gasser's action would have
been futile. Therefore, we consider the issues raised by Gasser but not addressed by
the circuit court adequately preserved for review. See Staubes v. City of Folly Beach,
339 S.C. 406, 414–15, 529 S.E.2d 543, 547 (2000) (finding that a Rule 59(e),
SCRCP, motion was not warranted under the circumstances of the case and stating,
"This [c]ourt does not require parties to engage in futile actions in order to preserve
issues for appellate review").
"The determination of whether a claim is subject to arbitration is subject to de
novo review." Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 148, 644 S.E.2d
705, 707 (2007). "Nevertheless, a circuit court's factual findings will not be reversed
on appeal if any evidence reasonably supports the findings." Id.

LAW/ANALYSIS

I. Equitable Estoppel

Provider maintains the circuit court erred by concluding that Insureds'
purported lack of knowledge of the Provider Agreements when they received
medical care precluded the application of equitable estoppel to them. Provider
argues that even if Insureds had provided evidence to support this conclusion, it does
not matter to the equitable estoppel analysis because Insureds knew about the
Provider Agreements when they filed their complaints seeking to enforce them. 4
Provider further argues that Insureds' attempt to enforce these contracts amounts to
an exploitation of the contracts for purposes of equitable estoppel. We agree with
all of these arguments.

4
There is no evidence appearing in the record indicating that Insureds were unaware
of the Provider Agreements when they received medical care. Further, at least one
court has rejected a similar argument:

[The purchaser's predecessor] contended that it had no
knowledge of, and so could not be bound by, the "General
Conditions" (containing the arbitration clause) assertedly
made part of the [manufacturer-distributor] contract. The
district court rejected this argument, reasoning that
because [the purchaser's predecessor] sought "to take
advantage of certain commitments that were made by [the
manufacturer] to" [the distributor] in the
[manufacturer-distributor] contract, it was bound by all
commitments in that contract, including the arbitration
provision.

Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 415
(4th Cir. 2000). The Fourth Circuit upheld the district court's ruling that the
purchaser "cannot seek to enforce those contractual rights and avoid the contract's
requirement that 'any dispute arising out of' the contract be arbitrated." Id. at 418.
[E]quitable estoppel . . . estops a nonsigner from refusing
to comply with an arbitration provision of a contract if (1)
the nonsigner's claim arises from the contractual
relationship, (2) the nonsigner has 'exploited' other parts
of the contract by reaping its benefits, and (3) the claim
relies solely on the contract terms to impose liability.

Weaver v. Brookdale Senior Living, Inc., 431 S.C. 223, 230, 847 S.E.2d 268, 272
(Ct. App. 2020) (citing Wilson v. Willis, 426 S.C. 326, 340–44, 827 S.E.2d 167, 175–
77 (2019)).

In the arbitration context, the doctrine [of direct benefits
estoppel] recognizes that a party may be estopped from
asserting that the lack of his signature on a written contract
precludes enforcement of the contract's arbitration clause
when he has consistently maintained that other provisions
of the same contract should be enforced to benefit him.

Pearson v. Hilton Head Hosp., 400 S.C. 281, 290, 733 S.E.2d 597, 601 (Ct. App.
2012) (quoting Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206
F.3d 411, 418 (4th Cir. 2000)). "[W]here plaintiffs sue and seek relief based on
contracts containing arbitration clauses, courts have applied equitable estoppel."
Wilson, 426 S.C. at 344, 827 S.E.2d at 177 (citing Int'l Paper, 206 F.3d at 417–18).5

5
See also Thompson v. Pruitt Corp., 416 S.C. 43, 57, 784 S.E.2d 679, 687 (Ct. App.
2016) ("[A] third-party beneficiary to an arbitration agreement cannot be required to
arbitrate a claim unless the third party is attempting to enforce the contract
containing the arbitration agreement." (emphasis added) (quoting Dickerson v.
Longoria, 995 A.2d 721, 742 (Md. 2010))); Georgia Power Co. v. Partin, 727 So.2d
2, 5 (Ala. 1998) ("[A] contract made for the benefit of a third person may, at his
election, be accepted and enforced by him. However, '[i]f he claims the benefits [of
the contract], he also assumes the burdens.' 'The law is clear that a third[-]party
beneficiary is bound by the terms and conditions of the contract that it attempts to
invoke. "The beneficiary cannot accept the benefits and avoid the burdens or
limitations of a contract."'" (citations omitted) (quoting Michie v. Bradshaw, 149 So.
809, 814 (Ala. 1933) and Interpool Ltd. v. Through Transport Mut. Ins. Ass'n Ltd.,
635 F.Supp. 1503, 1505 (S.D. Fla. 1985))); id. (holding that because the plaintiff
brought his breach-of-contract claim as a third-party beneficiary of the operations
agreement between the corporate defendant and a second corporation, he chose "to
accept and enforce all of its terms, including the arbitration clause that he seeks to
"When a claim depends on the contract's existence and cannot stand independently—
that is, the alleged liability 'arises solely from the contract or must be determined by
reference to it'—equity prevents a person from avoiding the arbitration clause that
was part of that agreement." Wilson, 426 S.C. at 343, 827 S.E.2d at 176 (emphasis
added) (quoting Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 637
(Tex. 2018)).

Accordingly, in examining a claim of equitable estoppel in the arbitration
context, the court must determine the source of the defendant's duty to the plaintiff
as alleged in the complaint. Here, in paragraphs 62 and 63 of her complaint, Bennett
alleged, "By failing to bill [Insurer] directly, Defendant breached its Provider
Agreement with [Insurer], including the covenant of good faith and fair dealing[,]"
and Bennett "and members of the class are third-party beneficiaries of the breached
Provider Agreement." In paragraphs 66 and 67, Bennett alleged that Provider's
breaches had deprived Bennett and class members of "benefits they paid for through
their health insurance with [Insurer]" and that they were "entitled to recover damages
from [Provider] for breach of contract arising from [Provider's] breaches." We note
that Bennett's contract with Insurer is not in the record, and nothing in the record
suggests that Bennett is precluded from seeking reimbursement or other relief from
Insurer.

Further, in paragraphs 69 through 75 of the complaint, i.e., Bennett's unjust
enrichment claim, she asserted that had Provider complied with the Provider
Agreement's terms rather than billing her at a rate higher than the agreed-upon rate,
Provider would have received less money for the services it provided to Bennett, and
therefore, she was entitled "to recover the increased rates." In her "Equity" claim,
paragraphs 76 through 79 of the complaint, Bennett based her request for
"appropriate" equitable relief on her allegation that Provider "thwarted contractual
obligations to take advantage of individuals coming to them for medical
emergencies." Therefore, Bennett pled all of her claims as being based on an alleged
duty arising solely from the terms of the Provider Agreement. See Wilson, 426 S.C.
at 343, 827 S.E.2d at 176 ("When a claim depends on the contract's existence and

avoid"); Dist. Moving & Storage Co. v. Gardiner & Gardiner, Inc., 492 A.2d 319,
323 (Md. Ct. Spec. App. 1985) (holding that a warehouse lessee "should not be
allowed to sue for breach of the contracts between [the lessor] and [the architectural
firm and contractors] and thus benefit from those agreements without equally being
made to abide by the terms of the contracts compelling arbitration of disputes arising
therefrom"), aff'd sub nom. Dist. Moving & Storage, Inc. v. Fedco Sys., Inc., 508
A.2d 487 (Md. 1986) (per curiam).
cannot stand independently—that is, the alleged liability 'arises solely from the
contract or must be determined by reference to it'—equity prevents a person from
avoiding the arbitration clause that was part of that agreement." (emphasis added)
(quoting Jody James Farms, 547 S.W.3d at 637)).

Likewise, in Gasser's breach of contract claim, paragraphs 35 through 39 of
her complaint, she alleged that Provider "breached its contract with [Insurer],
[Gasser], and the other class members, as third-party beneficiaries, by refusing to
submit claims to [Insurer]. [Provider] deprived Ms. Gasser of the benefits of the
discounts and other provisions negotiated between [Insurer] and [Provider]." As
with Bennett's contract with Insurer, Gasser's contract with Insurer is not in the
record, and nothing in the record suggests that Gasser is precluded from seeking
reimbursement or other relief from Insurer.

Further, in paragraphs 40 through 45, Gasser's unjust enrichment claim, she
alleged that Provider was unjustly enriched by collecting payments from her and the
putative class members "in contradiction to the agreed upon price for services
bargained for between [Provider] and [Insurer]" and "[e]quity demands that
[Provider] be compelled to return its ill-gotten gains." As with all of Bennett's
claims, all of Gasser's claims were pled as being based on an alleged duty arising
solely from the Provider Agreement. See Wilson, 426 S.C. at 343, 827 S.E.2d at 176
("When a claim depends on the contract's existence and cannot stand
independently—that is, the alleged liability 'arises solely from the contract or must
be determined by reference to it'—equity prevents a person from avoiding the
arbitration clause that was part of that agreement." (emphasis added) (quoting Jody
James Farms, 547 S.W.3d at 637)).

Insureds maintain that South Carolina does not recognize direct benefits
estoppel. However, this court applied the doctrine of direct benefits estoppel in
Pearson v. Hilton Head Hospital, 400 S.C. 281, 733 S.E.2d 597 (Ct. App. 2012),
and our supreme court discussed the doctrine at length in Wilson. 426 S.C. at 339–
45, 827 S.E.2d at 174–77. In Wilson, an insurance agent's customers brought an
action against the agent, her employer, and several insurers for fraud, conversion,
and unfair trade practices. Id. at 331–32, 827 S.E.2d at 170. The insurers argued
that the customers were estopped from asserting that they were nonsignatories to the
agency agreement between the insurers and the agent's employer that included the
arbitration clause at issue. Id. at 332–33, 827 S.E.2d at 171. Our supreme court
stated that general principles of South Carolina law formed the basis for the
customers' claims alleging misconduct that did not arise from the agency agreement.
Id. at 342, 827 S.E.2d at 176.
Thus, rather than rejecting direct benefits estoppel, the Wilson court applied
the doctrine to the facts before it and concluded that any benefit the plaintiffs may
have received from the insurance agency agreement was indirect at best:

In our view, Petitioners have not knowingly exploited and
received a direct benefit from the Agency Agreement. As
originally found by the circuit court, the Agency
Agreement executed by Southern Risk and the Insurers
was purely for the benefit of the parties to the contract in
outlining their business relationships and the rights of the
parties to the Agency Agreement. Petitioners have not
attempted to procure any direct benefit from the Agency
Agreement itself while attempting to avoid its arbitration
provision.

Id. at 344–45, 827 S.E.2d at 177 (emphasis added). The court declined to address
the plaintiffs' argument that South Carolina's traditional equitable estoppel test had
to be applied to the case because that test was not argued before the circuit court:

Petitioners assert, as an alternative argument on appeal,
that the traditional state test for equitable estoppel
enumerates six factors for consideration, and they further
argue the traditional state test has not been met here
because they have not engaged in false or misleading
conduct that caused injury to Respondents, nor have
Respondents claimed they lacked knowledge of the facts
in question, relied upon the conduct of Petitioners, and
suffered a prejudicial change of position. The traditional
test referenced by Petitioners has been analyzed most
often in non-arbitration cases. We find this assertion is
not properly before the [c]ourt, as the parties and both
courts below focused their discussions on whether the
direct benefits test for estoppel had been met.
Consequently, we also apply the direct benefits test and
express no opinion on Petitioner's alternative argument.

Id. at 340 n.9, 827 S.E.2d at 175 n.9 (emphasis added) (citations omitted).
Here, Provider notes that in addition to Insureds' attempt to enforce the
Provider Agreements, their admissions in their respective complaints that they
received direct benefits from the Provider Agreements preclude them from avoiding
the arbitration provisions in these agreements. Bennett's complaint alleges that she
received "direct benefits from the Provider Agreement, including[,] but not limited
to: not receiving bills directly from an in-network provider, and the costs of the
services by an in-network provider being limited to [Insurer's] negotiated rates."
Further, Gasser's complaint alleges that Provider "deprived Ms. Gasser of the
benefits of the discounts and other provisions negotiated between [Insurer] and
[Provider]."

Based on the foregoing, Insureds are equitably estopped from avoiding the
arbitration provisions in the Provider Agreements. 6

II. Issues not addressed by the circuit court

Provider also raises several issues that it raised before the circuit court when
it submitted its respective motions to compel and its motion for reconsideration but
on which the circuit court declined to rule. We address these questions in turn.

A. Bilateral arbitration

Provider asserts that Insureds' claims are subject to bilateral, rather than class,
arbitration. However, nothing in the record indicates that Insureds have even
requested class arbitration. Rather, they categorically oppose arbitration. Therefore,
the question is hypothetical and, thus, unripe for judicial review. See Jowers v. S.C.
Dep't of Health & Env't Control, 423 S.C. 343, 353–54, 815 S.E.2d 446, 451 (2018)
("We have explained ripeness by defining what is not ripe, stating 'an issue that is
contingent, hypothetical, or abstract is not ripe for judicial review.'" (quoting
Colleton Cnty. Taxpayers Ass'n v. Sch. Dist. of Colleton Cnty., 371 S.C. 224, 242,
638 S.E.2d 685, 694 (2006))).

B. FAA versus SCUAA

6
We decline to address Provider's argument that the circuit court singled out the
defense of arbitration, unlike other contract defenses to a third-party beneficiary
claim, for suspect status. See Earthscapes Unlimited, Inc. v. Ulbrich, 390 S.C. 609,
617, 703 S.E.2d 221, 225 (2010) (holding that an appellate court need not address
remaining issues when the resolution of a prior issue is dispositive).
Provider asserts that Insureds' claims are subject to arbitration pursuant to the
FAA because the Provider Agreements evidence a transaction involving interstate
commerce. See 9 U.S.C. § 2 ("A written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract . . . shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation of any contract . . . ."
(emphasis added)). Although the subject transactions in Insureds' class actions
likely involve interstate commerce, 7 the Provider Agreements' language requires
arbitration subject to the SCUAA.

"Unless the parties have contracted to the contrary, the FAA applies in federal
or state court to any arbitration agreement regarding a transaction that in fact
involves interstate commerce, regardless of whether or not the parties contemplated
an interstate transaction." Munoz v. Green Tree Fin. Corp., 343 S.C. 531, 538, 542
S.E.2d 360, 363 (2001) (emphasis added) (footnote omitted). "[T]he parties are free
to enter into a contract providing for arbitration under rules established by state law
rather than under rules established by the FAA." Id. at 539 n.2, 542 S.E.2d at 363
n.2. "The FAA preempts state laws that invalidate the parties' agreement to arbitrate
'[b]ut it does not follow that the FAA prevents the enforcement of agreements to
arbitrate under different rules than those set forth in the [FAA] itself.'" Id. (emphasis
added) (quoting Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Jr. Univ.,
489 U.S. 468, 479 (1989)). Section 4 of the FAA "does not confer a right to compel
arbitration of any dispute at any time; it confers only the right to obtain an order
directing that 'arbitration proceed in the manner provided for in [the parties']
agreement.'" Volt, 489 U.S. at 474–75 (quoting 9 U.S.C. § 4).

7
Provider is a Georgia professional corporation, licensed to do business in Georgia,
South Carolina, and Florida, and it does business in Georgia and South Carolina.
Provider rendered healthcare services to Insureds, who are South Carolina residents,
in South Carolina, but Provider contracted with a company organized under Florida
law, HCFS Healthcare Financial Services, LLC (HCFS), to code and bill for
Provider's services to patients. The patient's medical records, including the
clinician's documentation, are transmitted from the facility where treatment was
rendered, here in South Carolina, to HCFS's office in Alcoa, Tennessee. "Once the
CPT code and corresponding charge are determined . . . , a bill is generated and sent
to the payer from billing operations in Florida." Further, Insurer is a South Carolina
mutual corporation, but a representative of HCFS stated in her affidavit that Provider
negotiated the Provider Agreements "from a location other than South Carolina."
Here, the Provider Agreements' arbitration provisions include the requirement
that the arbitration must be conducted in South Carolina. Further, paragraph IX.J of
both Provider Agreements states, "This Agreement shall be construed and enforced
in accordance with the laws of the State of South Carolina." (emphasis added).
Similarly, in Volt, the United States Supreme Court observed that the disputed
contract "contained an agreement to arbitrate all disputes between the parties 'arising
out of or relating to this contract or the breach thereof'" and "also contained a
choice-of-law clause providing that '[t]he Contract shall be governed by the law of
the place where the Project is located.'" 489 U.S. at 470. Like the choice of law
provision in the present case, the Volt contract's choice of law provision was separate
from the arbitration provision, and the Court found that through this choice of law
provision, the parties "agreed to abide by state rules of arbitration." Id. at 479. The
disputed project was located in California, which had enacted a statute permitting a
court "to stay arbitration pending resolution of related litigation between a party to
the arbitration agreement and third parties not bound by it, where 'there is a
possibility of conflicting rulings on a common issue of law or fact.'" Id. at 471
(quoting Cal. Civ. Proc. Code Ann. § 1281.2(c) (West 1982)). Pursuant to this
statute, the California Superior Court denied the motion to compel arbitration and
stayed arbitration proceedings pending the plaintiff's lawsuit. Id. The United States
Supreme Court affirmed the California Court of Appeal decision upholding the
Superior Court's ruling, explaining,

Where, as here, the parties have agreed to abide by state
rules of arbitration, enforcing those rules according to the
terms of the agreement is fully consistent with the goals of
the FAA, even if the result is that arbitration is stayed
where the Act would otherwise permit it to go forward. By
permitting the courts to "rigorously enforce" such
agreements according to their terms, we give effect to the
contractual rights and expectations of the parties, without
doing violence to the policies behind by the FAA.

Id. at 479 (citation omitted) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S.
213, 221 (1985)).

Based on the foregoing, the parties must proceed to arbitration under the
SCUAA. However, we add a caveat: To the extent that any one provision in the
SCUAA would invalidate the Provider Agreements' arbitration provisions, that
specific provision is preempted by the FAA. See Munoz, 343 S.C. at 538 n.2, 542
S.E.2d at 363 n.2 ("In Soil Remediation Co. v. Nu–Way Envtl., Inc., 323 S.C. 454,
476 S.E.2d 149 (1996), we found an arbitration agreement that did not comply with
the technical notice requirements of § 15-48-10(a) was nonetheless valid because
the FAA included no such notice requirement. We did not address the impact of the
parties' agreement that the state Arbitration Act would apply. We now clarify that
the result in Soil Remediation hinged on the fact that application of state law would
have rendered the arbitration agreement completely unenforceable under
§ 15-48-10(a)[,] which provides that a contract failing to comply with statutory
notice requirements shall not be subject to arbitration. State law was therefore
preempted to the extent it would have invalidated the arbitration agreement. The
parties to a contract are otherwise free to agree that our state Arbitration Act will
apply and this agreement shall be enforceable even if interstate commerce is
involved." (emphases added)).

Insureds rely on section 15-48-10(b)(4) to support their additional sustaining
ground that their claims are not subject to arbitration because this provision excludes
insurance contracts from arbitration: "This chapter . . . shall not apply to . . . [a]ny
claim arising out of personal injury, based on contract or tort, or to any insured or
beneficiary under any insurance policy or annuity contract." (emphasis added).
Although the FAA would otherwise preempt this provision based on its rendering
an arbitration agreement completely unenforceable, the provision is protected by the
federal McCarran-Ferguson Act. See Cox v. Woodmen of World Ins. Co., 347 S.C.
460, 468, 556 S.E.2d 397, 402 (Ct. App. 2001) (holding that § 15-48-10(b)(4)
"'reverse pre-empts' the FAA through application of the McCarran-Ferguson Act,"
which prohibits federal legislation from impairing any state law enacted for the
purpose of regulating the insurance business unless the federal legislation
specifically relates to the insurance business).

Bennett argues that the Provider Agreement corresponding to her case
depends on her insurance contract with Insurer and this dependence brings the
Provider Agreement within the coverage of section 15-48-10(b)(4). However, in
Cox, this court held that section 15-48-10(b)(4) "is a specific exemption limited to
entities within the insurance industry." 347 S.C. at 468, 556 S.E.2d at 402. Provider
is not within the insurance industry as it employs medical professionals, including
doctors.

Also, this court has held that section 15-48-10(b)(4) "was . . . intended to
apply directly to an insurance contract." Walden v. Harrelson Nissan, Inc., 399 S.C.
205, 210, 731 S.E.2d 324, 326 (Ct. App. 2012). The court explained, "The FAA and
section 15-48-10(b)(4) conflict with one another only when a litigant seeks to
enforce an arbitration agreement contained in an insurance policy governed by South
Carolina law." Id. Here, although the Provider Agreements facilitate Insurer's
fulfillment of its insurance contracts with Insureds, it is not itself an insurance policy.
Rather, the consideration for the Provider Agreements is Provider's enjoyment of the
advantage of being designated a Network Provider (or Preferred Provider) in
exchange for agreeing to accept certain rates as payment in full for services covered
under Insureds' own contracts with Insurer. Therefore, section 15-48-10(b)(4) does
not apply to Insureds' claims against Provider, which are all based on the Provider
Agreements.

C. Dismissal versus Stay of Insureds' Claims

Provider argues that Insureds' claims should be dismissed because all of them
are subject to arbitration. We disagree. Section 15-48-20(d) of the South Carolina
Code (2005) states,

Any action or proceeding involving an issue subject to
arbitration shall be stayed if an order for arbitration or an
application therefor has been made under this section or,
if the issue is severable, the stay may be with respect
thereto only. When the application is made in such action
or proceeding, the order for arbitration shall include such
stay.

(emphasis added). The parties have not cited to any case law, and we have found
none, interpreting this provision. However, our supreme court has held that the use
of "shall" in a statute "means that the action is mandatory." Wigfall v. Tideland
Utilities, Inc., 354 S.C. 100, 111, 580 S.E.2d 100, 105 (2003). Further, the United
States Supreme Court recently interpreted a comparable provision in the FAA, 9
U.S.C. § 4, and stated that the provision's use of the word "shall" "'creates an
obligation impervious to judicial discretion.'" Smith v. Spizzirri, 601 U.S. 472, 476
(2024) (quoting Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S.
26, 35 (1998)). Therefore, we reject Provider's argument that the present action
should be dismissed.

III. Additional Sustaining Grounds

Recognizing that our decision today frustrates Insureds' desire for a jury trial,
we exercise our discretion to address the issues they raise by way of additional
sustaining grounds. See I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 420,
526 S.E.2d 716, 723 (2000) ("It is within the appellate court's discretion whether to
address any additional sustaining grounds."). In section II.B of this opinion, we
addressed the additional sustaining ground asserting that Insureds' claims fall within
section 15-48-10(b)(4), which excludes insurance contracts from arbitration. See
supra Section II.B. We address their remaining additional sustaining grounds below.

A. Scope of arbitration

Bennett argues that this court may affirm the denial of Provider's motion to
compel arbitration on the ground that her claims do not fall within the scope of the
Provider Agreement's arbitration provision. We disagree.

"A motion to compel arbitration made pursuant to an arbitration clause in a
written contract should only be denied where the clause is not susceptible to any
interpretation [that] would cover the asserted dispute." Zabinski v. Bright Acres
Assocs., 346 S.C. 580, 597, 553 S.E.2d 110, 118–19 (2001). Here, the pertinent part
of paragraph IX.M in the Provider Agreement states that Insurer and Provider "agree
to meet and confer in good faith to resolve any problems or disputes that may arise
under this Agreement. . . . In the event that the parties through mutual negotiation
are not able to satisfactorily resolve any problem or dispute, . . . [Insurer] and
[Provider] agree to arbitrate such problem or dispute." (emphases added).

Bennett maintains that these terms cover arbitration between Provider and
Insurer only. If we were to adopt this argument, the concept of a non-signatory being
estopped from avoiding an arbitration provision could never be enforced because
most arbitration provisions will naturally reference the parties to the contract in
which the arbitration provision is included. Further, a reasonable construction of the
Provider Agreement's arbitration provision is that the word "any" in the phrase "any
problems or disputes that may arise under this Agreement," covers not only disputes
between Provider and Insurer but also disputes between a third party and either
Provider or Insurer as long as the dispute arises under the Provider Agreement.

Moreover, most of the jurisdictions that have examined whether to apply
equitable estoppel to third-party beneficiaries have not interpreted the disputed
arbitration provisions as narrowly as Bennett does here. See The Detroit Edison Co.
v. Burlington N. & Santa Fe Ry. Co., 442 F. Supp.2d 387, 389 (E.D. Mich. 2006)
(applying the following arbitration provision to third-party beneficiaries: "If a
question or controversy arises between the parties concerning the observance,
performance, interpretation, administration or implementation of any of the terms,
provisions, or conditions contained herein or the rights or obligations of either party
under this Agreement, such question or controversy shall in the first instance be the
subject of a meeting between the parties to negotiate a resolution of such dispute. If,
within thirty (30) days after the meeting, the parties have not negotiated a resolution
or mutually extended the period of negotiation, either party may seek resolution of
the question or controversy pursuant to binding arbitration"); Benton v. Vanderbilt
Univ., 137 S.W.3d 614, 617 (Tenn. 2004) (applying the following arbitration
provision to a third-party beneficiary: "If a dispute . . . arises between the parties of
this Agreement involving a contention by either party that the other has failed to
perform its obligations and responsibilities under this Agreement, then the party
making such contention shall promptly give written notice to the other. Such notice
shall set forth in detail the basis for the party's contention. . . . The other party shall
within thirty (30) calendar days after receipt of the notice provide a written response
seeking to satisfy the party that gave notice regarding the matter as to which notice
was given. Following such response . . . if the party that gave notice of
dissatisfaction remains dissatisfied, then that party shall so notify the other party and
the matter shall be promptly submitted to inexpensive and binding arbitration in
accordance with the Tennessee Uniform Arbitration Act . . ."); Ga. Power Co. v.
Partin, 727 So.2d 2, 5 (Ala. 1998) (applying to a third-party beneficiary an
arbitration provision stating that arbitration "would apply '[i]n the event of any
dispute, difference of opinion[,] or controversy between the parties as to any
question of fact which may arise under this Agreement,' if either party requested
arbitration"); Dist. Moving & Storage Co., 492 A.2d at 321 (applying to a third-party
beneficiary an arbitration provision stating, "All claims, disputes and other matters
in question between the parties to this Agreement, arising out of, or relating to this
Agreement or the breach thereof, shall be decided by arbitration in accordance with
the Construction Industry Arbitration Rules of the American Arbitration Association
then obtaining unless the parties mutually agree otherwise").8

8
But see Rath v. Managed Health Network, Inc., 844 P.2d 12, 13 (Idaho 1992)
(holding that the following provision did not apply to the plaintiffs: "'Any
controversy between the parties to this Agreement' shall be settled informally, or
through arbitration if the parties are unable to settle informally"); id. ("The trial court
held that the [plaintiffs] were bound by the arbitration provision in the Agreement
based on their status as third[-]party beneficiaries. However, the cases relied upon
by the trial court are inapposite in the face of the language in the Agreement
expressly limiting the arbitration clause to the 'parties' to the Agreement."). We do
not find Rath persuasive because of the treatment it was given in The Detroit Edison
Co., 442 F. Supp. 2d at 392–93 (referencing Rath but declining to follow it) and in
Benton, 137 S.W.3d at 618–19 (rejecting Rath because other cited opinions from
Alabama, Pennsylvania, and Maryland relying on Williston on Contracts and the
Restatement (Second) of Contracts "reflect the better-reasoned analysis").
Based on the foregoing, we view all of Bennett's claims as falling within the
scope of the Provider Agreement's arbitration provision.

B. Condition Precedent

Next, both Insureds argue the Provider Agreements' arbitration provisions
include a condition precedent that cannot be met and, thus, they are unenforceable.
The pertinent part of paragraph IX.M in both Provider Agreements states that Insurer
and Provider "agree to meet and confer in good faith to resolve any problems or
disputes that may arise under this Agreement. . . . In the event that the parties
through mutual negotiation are not able to satisfactorily resolve any problem or
dispute, . . . [Insurer] and [Provider] agree to arbitrate such problem or dispute."
Insureds maintain that it is impossible to meet this condition because the scope of
the arbitration provisions does not confer on them "pre-arbitration dispute resolution
rights." We disagree.

For the same reasons that Bennett's claims fall within the scope of the
arbitration provision in the Provider Agreement corresponding to her case, see supra
Section III.A, the condition precedent in that provision (in both Provider
Agreements) may be satisfied by a meeting and good faith negotiation between
Insureds and Provider. Nothing in the arbitration provisions reveals an intent to
require a jury trial for the Provider Agreements' enforcement in the event the
condition for arbitration is not met. Additionally, it is illogical to infer such an intent
given that a party who prefers a jury trial could too easily prevent the fulfillment of
the condition. Cf. Champion v. Whaley, 280 S.C. 116, 121, 311 S.E.2d 404, 407 (Ct.
App. 1984) ("Where a party's repudiation contributes materially to the
nonoccurrence of a condition precedent to his duty of performance, the
nonoccurrence of the condition is excused.").

Further, we find it instructive that the overwhelming case law applying the
FAA requires the determination of whether a condition precedent to arbitration has
been met to be made by an arbitrator rather than the courts.9 See BG Grp., PLC v.

9
We have found no South Carolina case law interpreting the SCUAA on this
question; therefore, we look to persuasive authorities from other jurisdictions
interpreting the FAA. See State Farm Mut. Auto. Ins. Co. v. Goyeneche, 429 S.C.
211, 224, 837 S.E.2d 910, 917 (Ct. App. 2019) (stating that when there is no South
Carolina case directly on point, our courts may look to persuasive authority from
Republic of Argentina, 572 U.S. 25, 34–35 (2014); see also Chorley Enters., Inc. v.
Dickey's Barbecue Restaurants, Inc., 807 F.3d 553, 565 (4th Cir. 2015) ("As the
Supreme Court has recently re-affirmed, . . . arbitrators—not courts—must decide
whether a condition precedent to arbitrability has been fulfilled."); id. at 565 n.14
(listing three circuit opinions pre-dating BG Group and concluding those opinions
were no longer controlling).10

[C]ourts presume that the parties intend arbitrators, not
courts, to decide disputes about the meaning and
application of particular procedural preconditions for the
use of arbitration. These procedural matters include
claims of "waiver, delay, or a like defense to arbitrability."
And they include the satisfaction of "prerequisites such as
time limits, notice, laches, estoppel, and other conditions
precedent to an obligation to arbitrate."

BG Grp., 572 U.S. at 34–35 (emphasis added) (citations omitted) (quoting Moses H.
Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 (1983) and Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 85 (2002)).

In BG Group, the United States Supreme Court cited comment 2 to section 6
of the Revised Uniform Arbitration Act of 2000, which explains that this rule
"reflects 'the holdings of the vast majority of state courts.'" 572 U.S. at 35. The
Court also quoted section 6(c) itself, which states, in pertinent part, "An arbitrator
shall decide whether a condition precedent to arbitrability has been fulfilled." Id.
We acknowledge that the SCUAA does not appear to have adopted section 6(c) of
the Revised Uniform Arbitration Act. However, we have found no South Carolina
case law addressing which forum should decide whether a condition precedent has
been met.

Based on the foregoing, we hold that the condition precedent in the Provider
Agreements' arbitration provisions may not serve as an obstacle to an order
compelling arbitration.

C. Selected Forum Not Available

other jurisdictions as long as we do not apply them in a manner that conflicts with
our supreme court's precedent).
10
Insureds rely on the outdated opinions listed in note 14 of Chorley.
Bennett argues that the Provider Agreement's arbitration provision is
unenforceable because the exclusive forum for arbitration is unavailable. Placing
emphasis on certain cherry-picked phrases, she maintains that in 2003, the chosen
forum, AAA, announced that "it would not administer healthcare arbitrations
between individual patients and healthcare service providers that relate to medical
services, such as negligence and medical malpractice disputes, unless all parties
agreed to submit the matter to arbitration after the dispute arose."

On the other hand, Provider highlights the phrase "that relate to medical
services, such as negligence and medical malpractice disputes." Provider also quotes
the remainder of the announcement clarifying that AAA "will continue to administer
arbitrations that involve solely billing or collections matters between an individual
and a . . . healthcare provider," and "will administer disputes between patients and
healthcare providers to the extent a court order directs such a dispute to
arbitration where the parties' agreement provides for the AAA's rules or AAA
administration." The full AAA Healthcare Policy Statement appears on the AAA
website as follows:

In 2003, the American Arbitration Association® ("AAA")
announced that it would not administer healthcare
arbitrations between individual patients and healthcare
service providers that relate to medical services, such as
negligence and medical malpractice disputes, unless all
parties agreed to submit the matter to arbitration after the
dispute arose. This policy is consistent with the American
Arbitration Association/American Bar
Association/American Medical Association Due Process
Protocol for the Mediation and Arbitration of Health Care
Disputes.

However, the AAA will administer disputes between
patients and healthcare providers to the extent a court
order directs such a dispute to arbitration where the parties'
agreement provides for the AAA's rules or AAA
administration. In addition, the AAA will continue to
administer arbitrations that involve solely billing or
collections matters between an individual and a doctor or
healthcare provider, although such billing or collections
disputes may be governed by the AAA's Consumer Rules
and Consumer Due Process Protocol.
The AAA notes that this policy does not relate to or impact
the administration of all other types of disputes in the
healthcare field, such as disputes among providers,
healthcare companies, insurance carriers and related
entities. For more information on the AAA’s
administration of these types of cases and the AAA’s
Healthcare Payor Provider Arbitration Rules, please visit
www.adr.org.

https://www.adr.org/sites/default/files/document_repository/AAA_Healthcare_Poli
cy_Statement_0.pdf (last visited May 22, 2024).

Based on the foregoing, we reject Bennett's argument that the selected forum
is unavailable.

D. Unconscionability

Finally, Gasser asserts that the Provider Agreement's arbitration provision is
unconscionable because she had "no meaningful choice in accepting" the Provider
Agreement's terms and this contract contains "unreasonable, oppressive, and
one-sided terms." Throughout this section of her brief, Gasser vacillates between
characterizing the arbitration provision as unconscionable and characterizing the
entire Provider Agreement as unconscionable. For example, Gasser asserts that after
Insurer has published Provider's name as a network provider allowing discounted
rates, it would be unconscionable to preclude her from enforcing her claims in court.
This argument is not directed at the arbitration provision's terms themselves but
rather pertains to whether she should be equitably estopped from avoiding the
arbitration provision, which we have already addressed. We confine the following
analysis to whether the arbitration provision itself is unconscionable.

In York v. Dodgeland of Columbia, Inc., this court defined unconscionability
as,

"the absence of meaningful choice on the part of one party
due to one-sided contract provisions, together with terms
that are so oppressive that no reasonable person would
make them and no fair and honest person would accept
them." Thus, unconscionability is "due to both an absence
of meaningful choice and oppressive, one-sided terms."
406 S.C. 67, 85, 749 S.E.2d 139, 148 (Ct. App. 2013) (citation omitted) (quoting
Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 24–25, 644 S.E.2d 663, 668–69
(2007)). In the context of arbitration agreements, courts should "focus generally on
whether the arbitration clause is geared towards achieving an unbiased decision by
a neutral decision-maker." Simpson, 373 S.C. at 25, 644 S.E.2d at 668 (citing
Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999)). "It is under this
general rubric that we determine whether a contract provision is unconscionable due
to both an absence of meaningful choice and oppressive, one-sided terms." Id. at
25, 644 S.E.2d at 669.

In the present case, the arbitration provision as a whole is "geared towards
achieving an unbiased decision by a neutral decision-maker" 11 and does not rise to
the level of unconscionability. We will address each of the specific elements of
unconscionability in turn.

1. Absence of meaningful choice

We acknowledge that Gasser did not get to choose the language of the
arbitration provision in the Provider Agreement. Yet, nothing in the record suggests
that Gasser ever tried to seek relief from Insurer. Rather, she chose to file this class
action based on a contract between two sophisticated parties, Insurer and Provider.
Therefore, the fact that she did not choose the language in the arbitration provision
carries little weight in our unconscionability analysis.

2. Oppressive and one-sided terms

Gasser argues, "it would be unconscionable to entice consumers to use the
'preferred' providers in the network . . . based on promises of the network price
discounts, and then, in an undisclosed provision, remove the consumer's ability to
seek legal redress for those healthcare providers who disregard their promises."
Likewise, Gasser asserts that Provider's contract violations were unforeseeable and
the Provider Agreement was "invisible" to her. In support of this assertion, she cites
Aiken v. World Fin. Corp. of S.C., 373 S.C. 144, 151, 644 S.E.2d 705, 709 (2007)
for the proposition that the supreme court "will refuse to interpret any arbitration
agreement as applying to outrageous torts that are unforeseeable to a reasonable
consumer in the context of normal business dealings."

11
Simpson, 373 S.C. at 25, 644 S.E.2d at 668.
These arguments are not directed at the terms of the arbitration provision
themselves. In fact, Gasser does not cite any specific term that would hinder "an
unbiased decision by a neutral decision-maker." Simpson, 373 S.C. at 25, 644 S.E.2d
at 668. Further, we view the terms as particularly designed to achieve an unbiased
decision by a neutral decision-maker. They provide for the application of AAA
rules, require AAA to appoint an arbitrator who is knowledgeable in the healthcare
management field, and prohibit the arbitrator from re-writing the Provider
Agreement. They also require the arbitrator to follow legal contract construction
rules to render any decision. Although the arbitration provision precludes certain
remedies, i.e., "The arbitrator is prohibited [from] awarding any punitive, special[,]
or consequential damages," these terms apply equally to all parties to the
arbitration.12

Based on the foregoing, we reject Gasser's argument that the arbitration
provision is unconscionable.

CONCLUSION

Accordingly, we reverse the circuit court's respective orders in these two class
actions and remand for orders compelling arbitration and staying Insureds' claims.

REVERSED AND REMANDED.

HEWITT and VINSON, JJ., concur.

VINSON, J., concurring in result:

I concur in the result reached by the majority and wish to emphasize that
Insureds, through their pleadings, expressly asserted they were third-party
beneficiaries of the Provider Agreement and, therefore, are required to arbitrate.
Additionally, I agree that Insureds' breach of contract or breach of implied contract
and unjust enrichment claims arose solely from the Provider Agreement in that
Insureds alleged they did not receive the benefit of the negotiated rates under the
Provider Agreement.

HEWITT, J., concurs.

12
Unlike the arbitration provision challenged in Simpson, 373 S.C. at 28–30, 644
S.E.2d at 670–71, here, the arbitration provision in the Provider Agreement does not
deprive the parties of any remedy specifically mandated by statute.