Everett Samuel, Jr. v. Schumacher Homes

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Everett Samuel, Jr., Respondent,

v.

Schumacher Homes of South Carolina, Heather
McCarley, and Dave Boldman, Appellants.

Appellate Case No. 2019-001972

Appeal From Darlington County
Roger E. Henderson, Circuit Court Judge

Unpublished Opinion No. 2022-UP-148
Submitted March 17, 2022 – Filed March 23, 2022

AFFIRMED

Kenneth Michael Barfield and John William Fletcher,
both of Barnwell Whaley Patterson & Helms, LLC, of
Charleston, for Appellants.

Vincent Austin Sheheen and Gregory Brian Collins, both
of Savage Royall & Sheheen, of Camden, for
Respondent.

PER CURIAM: Schumacher Homes of South Carolina, Heather McCarley, and
Dave Boldman (collectively, Appellants) appeal the circuit court's denial of their
motion to dismiss Everett Samuel, Jr.'s action against them and compel arbitration.
We affirm pursuant to Rule 220(b), SCACR.

1. We hold the issue of waiver of arbitration through litigation is one for the court
to decide rather than arbitrators. We find Appellants' reliance on BG Group, PLC
v. Republic of Argentina is misplaced because the waiver defenses the Supreme
Court held were for arbitrators to decide did not include waiver of arbitration
through litigation. See BG Grp., PLC v. Republic of Argentina, 572 U.S. 25, 35
(2014) (stating procedural matters including claims of "waiver, delay, or a like
defense to arbitrability" are for arbitrators to decide (quoting Moses H. Cone Mem'l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 (1983))); Glass v. Kidder Peabody
& Co. 114 F.3d 446, 455 n.62 (4th Cir. 1997) (noting these defenses bear "no
relation to the 'default' a party may cite to contest a stay of litigation under section
3 of the [Federal Arbitration Act]"); 9 U.S.C.A. § 3 (West) (stating the courts
should stay an action which involves "any issue referable to arbitration under an
agreement in writing for such arbitration" until arbitration is completed, "providing
the applicant for the stay is not in default in proceeding with such arbitration"
(emphasis added)); Glass, 114 F.3d at 455 n.62 (stating section 3 default, which
may be considered by the court, "encompasses the limited range of circumstances
when a party seeking arbitration has 'substantially utiliz[ed] the litigation
machinery' before pursuing arbitration, and permitting the moving party to arbitrate
would seriously 'prejudice the party opposing the stay'" (alteration in original)
(quoting Maxum Founds. Inc. v. Salus Corp., 779 F.2d 974, 981 (4th Cir.1985))).
In addition, we hold the delegation provision, which stated the arbitrators would
"determine all issues regarding the arbitrability of the dispute" did not provide
"'clear and unmistakable' evidence" that the parties intended to delegate the issue
of waiver to the arbitrators. See Doe v. TCSC, LLC, 430 S.C. 602, 608, 846 S.E.2d
874, 877 (Ct. App. 2020) ("The parties may . . . delegate . . . gateway issues to an
arbitrator as long as there is 'clear and unmistakable' evidence of such
delegation.").

2. We hold the circuit court correctly ruled Samuel met his burden of establishing
Appellants waived their right to arbitration because Appellants took advantage of
the judicial system causing prejudice to Samuel. See Rhodes v. Benson Chrysler–
Plymouth, Inc., 374 S.C. 122, 125-26, 647 S.E.2d 249, 250-51 (Ct. App. 2007)
("[D]etermining whether a party waived its right to arbitrate is a legal conclusion
subject to de novo review; nevertheless, the circuit [court's] factual findings
underlying that conclusion will not be overruled if there is any evidence reasonably
supporting them." (quoting Liberty Builders, Inc. v. Horton, 336 S.C. 658, 664-65,
521 S.E.2d 749, 753 (Ct. App. 1999))); Johnson v. Heritage Healthcare of Estill,
LLC, 416 S.C. 508, 513, 788 S.E.2d 216, 218 (2016) ("The party seeking to
establish waiver has the burden of showing prejudice through an undue burden
caused by a delay in the demand for arbitration." (quoting Gen. Equip. & Supply
Co. v. Keller Rigging & Constr., S.C., Inc., 344 S.C. 553, 556, 544 S.E.2d 643, 645
(Ct. App. 2001))). The case was pending for over two years and was eligible for
trial according to the parties' consent scheduling order before Appellants moved to
compel arbitration, and the parties engaged in mediation and significant discovery,
including multiple depositions, upon which Samuel expended time and expense.
See Rhodes, 374 S.C. at 126, 647 S.E.2d at 251 (stating courts generally consider
three factors when determining whether a party waived its right to compel
arbitration, which are "(1) whether a substantial length of time transpired between
the commencement of the action and the commencement of the motion to compel
arbitration; (2) whether the party requesting arbitration engaged in extensive
discovery before moving to compel arbitration; and (3) whether the non-moving
party was prejudiced by the delay in seeking arbitration"); id. at 128 n.3, 647
S.E.2d at 252 n.3 ("Depositions involve substantial time, effort, and money, all of
which could have been avoided if [the appellant] had pursued arbitration earlier.");
id. at 128, 647 S.E.2d at 252 (holding "[t]he extent of discovery, in conjunction
with the status of the case on the trial docket, provide[d] a direct nexus to the
presence and degree of prejudice sustained by . . . the party opposing arbitration").
We hold the no-waiver provision incorporated into the Agreement from the
Construction Industry Arbitration Rules of the American Arbitration Association
did not prevent the circuit court from holding Appellants waived their right to
arbitration. See Liberty Builders, 336 S.C. at 666, 521 S.E.2d at 754 ("[A] 'no
waiver' rule does not prevent a waiver where participation in a judicial proceeding
has caused prejudice to an adversary." (quoting McMillin Dev., Inc. v. Home
Buyers Warranty, 80 Cal. Rptr. 2d 611, 617 (Cal. Ct. App. 1998))).

AFFIRMED.1

WILLIAMS, C.J., and KONDUROS and VINSON, JJ., concur.

1
We decide this case without oral argument pursuant to Rule 215, SCACR.